Newly listed investor and fund manager Propertylink has significantly de-risked its Melbourne logistics portfolio after leasing over 28,000 square metres of warehouse space in the south east to high-performance car manufacturer Walkinshaw Automotive Group.
The announcement of the Walkinshaw deal – one of 14 leasing deals revealed by Propertylink – was accompanied by an update on improving leasing conditions and a re-affirmation of prospectus earnings and distribution forecasts for FY17.
The news was welcomed by investors, with Propertylink shares ending the day up 6 per cent at 78¢ – though still well down on its August IPO price of 89¢ – on the day after Charter Hall pulled the float of its Long WALE REIT.
Walkinshaw, founded by the late British racing car driver Tom Walkinshaw, has signed a 15-year lease at Propertylink’s industrial facility at 71-93 Whiteside Road and 84 Main Road in Clayton South.
While the exact rent was not disclosed, the Australian Financial Review understands the 28,195 square metre deal was struck at between $75 and $85 per square metre, valuing it in excess of $2.1 million in annual rental income.
The Walkinshaw leasing deal was negotiated by CBRE’s Stephen Adgemis and David Aiello.
Mr Adgemis said it was the biggest leasing deal in the Melbourne south east by some margin and showed that some parts of the manufacturing sector were still expanding.
“From a manufacturing point of view it’s a great story for Melbourne. The Walkinshaw business is growing, not contracting unlike many others, and this move will push them into the next chapter of their long history in Australia,” he said.
Walkinshaw will relocate from multiple premises in the Clayton Business Park, where they’ve been for 19 years, replacing National Broadband Network provider Corning Cables and consolidating into one facility.
As part of the agreement reached by Propertylink with the existing tenant and new tenant, Corning Cables will continue to occupy the site until Walkinshaw moves in on September 1 next year, a “nirvana” scenario, according to Propertylink CEO Stuart Dawes.
“Our weighted average lease expiry [WALE] is now above six years in Melbourne, so we have de-risked that portfolio. Our Sydney portfolio has quite a short WALE, but there we are taking advantage of strong market conditions,” Mr Dawes told the Australian Financial Review.
Across the 14 leasing deals in Victoria, NSW, WA and Queensland, Propertylink reported much-improved leasing conditions with shorter vacancy periods, lower incentives and higher rents than what had been forecast in its prospectus
More than 80 per cent of Propertylink’s investment portfolio is weighted to Sydney and Melbourne. The A-REIT also manages property funds worth a $1 billion on behalf of global investors that include Goldman Sachs, Grosvenor Group, The Townsend Group and Chinese conglomerate Fosun.
Speaking from Hong Kong where he is attending a fund manager conference, Mr Dawes said Sydney remained the strongest commercial leasing market, especially for logistics assets with parts of Melbourne “difficult” and Brisbane and Perth “not easy”.
But he said feedback from the conference indicated a strong appetite for Australian assets because of the higher yields on offer compared with neighbouring countries.