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Sulphur Street Investment Strategy

The following statement was made to potential investors in the Information Memorandum dated 24 April 2017

The Investment Manager believes that the Property presents an attractive long term investment. The acquisition yield of circa 7.6% is circa 500 basis points above the 10 year Commonwealth bond rate, which the Investment Manager believes to be an attractive spread given that the Property is subject to a fresh 10 year lease with a good quality tenant.


The Property represents a secure, long term (and growing) yield on investment. The Investment Manager intends to hold the Property until the tenant has exercised its first option to extend the lease for 10 years or an alternate tenant is found.


The Property is located in close proximity to the fast growing North Lakes residential area which is likely to be positive to rental demand for warehouse and industrial space and consequently to capital values.


The Property is also in close proximity to the Bruce Highway which to the north is the main arterial route to the Sunshine Coast and North Eastern Queensland. The Bruce Highway going south connects to the Gateway Motorway and each of Brisbane’s major arterial roads. The Bruce Highway is currently subject to an $8.5 billion upgrade. These works commenced in 2013 and are scheduled to take 10 years to complete. This upgrade will further add to the attraction of the location.


The Property is in a market segment that traditionally attracts much demand. In the Investment Manager’s opinion the Property represents an attractive risk return opportunity for investors seeking steady long term income.


Varley has insisted on a starting rental of $115/sqm which the Investment Manager believes is slightly above the market rent for the Property. The lease stipulates that the rent will escalate at 3% p.a. or CPI, whichever is higher ,which may mean that the rent remains above market on lease expiry. The possibility of continued over rental has been factored into the Investment Manager’s consideration of the transaction and forecast returns.


Pipeclay is targeting an IRR in excess of 11% for equity investors over the10 year proposed life of this Trust.

Source: Information Memorandum dated 24 April 2017

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