Cromwell Funds Management sells Rand Distribution Centre at 18.96% premium to book value

Following an expression of interest campaign, Cromwell Funds Management (CFM) has exchanged contracts for the sale of the Rand Distribution Centre in Direk, South Australia for $63.05 million on behalf of the asset’s owner, Cromwell Property Trust 12 (C12 or the Trust). The sale represents an 18.96% premium to the asset’s book value.

Located within the industrial precinct of Direk, approximately 27 kilometres north of the Adelaide CBD, Rand Distribution Centre is a modern, purpose-built cold storage facility currently leased to Rand Transport, a wholly-owned subsidiary of Anchorage Capital Partners. The asset has a 15-year remaining lease term.

Hamish Wehl, Head of Retail Funds Management at Cromwell, said the sale was a fantastic result for C12 unitholders.

“The sale price is an exceptional outcome for investors. The asset was initially acquired in 2013 with an ‘as if complete’ value of $32.75 million.”

“Cromwell expects to make a special distribution of the sale proceeds to C12 unitholders upon settlement of the property,” Mr Wehl concluded.

As at 30 June 2020, C12 had delivered returns of 13.5% p.a. annualised since its October 2013 inception (after fees and costs). The Trust replicates many features of Cromwell’s other unlisted property trusts, including the seven-year initial investment period, innovative construction funding structure and long lease term. The Trust also owns 19 George Street in Dandenong, Victoria, which is valued at $100 million.

The sale is expected to settle in mid-December, beyond the initial term of the Trust which ends on 31 October 2020.

JLL’s Tony Iuliano and Adrian Rowse sold the asset on behalf of Cromwell.

JLL’s Head of Capital Markets, Industrial and Logistics - Australia, Tony Iuliano said, “We received significant participation from both off-shore investors including new entrants wanting to deploy capital into Australia, as well as onshore groups, resulting in a vigorously contested process.”

“Refrigeration distribution centres have become an increasingly popular investment class in recent years primarily because of the longer lease stability in income. They have drawn increasing attention in the current environment due to domestic consumer demand and the rise in non-discretionary retailing.”

“Industrial assets with strong underlying leasing covenants in close proximity to major infrastructure are highly sought after.”

Prior to the end of the Trust’s initial term, CFM intends to put a proposal to unitholders to retain the asset at 19 George Street, Dandenong, and to extend the Trust for a second term. Details of any such proposal will be sent to all unitholders and would require a unitholder vote to proceed.