Oxley Investment Strategy
The following statement was made to potential investors in the Information Memorandum dated 30 September 2015
The Investment Manager believes that over the long term well located industrial land in the greater Brisbane area will appreciate in value at annual growth rates in excess of the Consumer Price Index.
The Investment Manager is attracted to this Property for two reasons:
The Property is well tenanted and well suited to the current occupants needs and is therefore expected to generate good rental income in the medium to long term.
The prospects for capital growth are underpinned by the Property’s relatively low site coverage, location and high potential to be approved for “bulky goods” retail use.
Chep Australia and its associates have occupied the property since 1992 and has recently agreed to a new five year lease which started in August this year, together with 2 options for extension. The improvements provide Chep Australia with relatively inexpensive premises for its pallet refurbishment works. The large expanse of concrete hardstand is operationally required for pallet storage and movement. The Investment Manager believes that Chep Australia has negotiated an attractive rent for the Property and protected its position by fixed rent reviews and a 10% cap on rent increases at “market” rent reviews. Consequently the Investment Manager believes that Chep Australia is likely to exercise at least one of its renewal options.
The Property is located diagonally opposite a major Bunnings store and a few hundred metres from Harvey Norman and a number of other bulky goods retailers. The neighbouring property 141 Boundary Rd, which is further away from these existing bulky goods retail outlets, has already obtained development approval for conversion to retail use (bulky goods). The Brisbane Council has verbally confirmed that converting 141A Boundary Road to retail use (bulky goods) would be in accordance with Council policy.
The independent valuer appointed by the CBA has estimated the Property’s current land value to be $350 per sqm ($7.36 million). This represents a significant portion (90%) of the agreed purchase price. The Investment Manager therefore expects the Property to experience above average capital growth over the longer term.
The Property offers the prospect of an attractive (and growing) income yield together with a long term capital gain opportunity based on growth in land value. Pipeclay is targeting an overall return to investors of 14.1% p.a. (annual effective) over the 15 year proposed life of this investment.
Source: Information Memorandum dated 30 September 2015