Geebung Investment Strategy
The following statement was made to potential investors in the Information Memorandum dated 8 September 2016
The Investment Manager believes that the Property presents an attractive long term investment. The acquisition yield of 7.0% is circa 500 bpts above the 10 year Commonwealth bond rate, which the Investment Manager believes to be an attractive spread given that both buildings offer good quality long term cash flow.
O'Brien's have occupied the smaller building since 1998 and appears to have established high brand recognition in the area. O’Brien’s has previously exercised options to extend the lease in 2005 and 2012. On both occasions O'Brien's also insisted on a new 7 year option being granted as a precondition to its option exercise. The Investment Manager currently expects O'Brien's to do the same in 2019.
The National Glass building is a very high quality modern building in a good location with a range of attractive features that are both tailored to the requirements of National Glass and which have broader market appeal. The building is 365 metres long, which facilitates unidirectional handling of glass through the building with limited direct human handling; most movement being either by conveyer or overhead crane. This arrangement provides efficiencies for National Glass but also means that the warehouse concrete slab is subjected to little vehicular traffic, which will promote its longevity. Furthermore, the National Glass building is next door to its existing facility and adjacent to its parent company Bradnam’s Doors and Windows, a highly regarded supplier of windows and doors, which is also a major customer of National Glass.
Whilst the Property appears to be ideally suited to National Glass the building also lends itself to being subdivided into three or four adjoining warehouses, which could be an attractive alternative tenancy strategy.
The Property represents a secure, long term (and growing) yield on investment. The Investment Manager intends to hold the larger building until National Glass exercises its option to extend the lease for 10 years or an alternate tenant is found, at which point the building will be sold. The O'Brien's building is being consolidated into a single separate title and can therefore be sold separately should it be to the advantage of the Trust. The Trustee intends to review this part of the investment in 2019.
Source: Information Memorandum dated 8 September 2016