UniSuper buys 13.2ha Yarraville site for $105 million
Richmond Bridge has secured a $105 million logistics development site in Yarraville, in inner-western Melbourne, that the investment manager said was a sign of well-priced opportunities increasingly coming to market for cash-flush buyers.
Founder and chief investment officer Peter Wylie said Richmond Bridge would have paid “materially” more 12 months ago for the 13.2-hectare property near the Port of Melbourne, which it acquired for industry super fund UniSuper’s $6.3 billion unlisted property portfolio.
With site values falling and financing costs rising for many developers, it was an exciting environment for buyers with cash, Mr Wylie told The Australian Financial Review.
“2023 should be some good buying,” he said. “Twelve months ago it was like you had to overpay to get something, it was so competitive, whereas now you are able to get it at value or slightly below value.”
Rising financing costs are raising pressure on buyers across the board, from individual residential buyers to commercial developers and large institutions.
While the conditions are unlikely to trigger a repeat of the meltdown of the global financial crisis for the largest REITs, many smaller borrowers will have to sell assets as their rental revenue fails to keep up with rising repayment obligations.
“Interest coverage is going to be the big one,” said Mr Wylie, a former Lendlease head of capital.
“Interest rates have gone up. The cost of debt has gone up. There will be bank-induced, covenant-related distress.”
UniSuper’s senior manager of property, Nick Stephens, said the fund intended to redevelop the Yarraville site over the medium term into a modern infill logistics estate.
“We look forward to considering additional opportunities to grow our industrial property portfolio further,” he said.
Richmond Bridge, a new firm that includes former Future Fund property head Barry Brakey and former AMP Capital head of real estate funds management Chris Judd on its investment committee, will provide asset and investment advisory services for the Yarraville asset and HB&B Property will provide development management services.
Richmond Bridge was focusing on industrial property initially but would expand into other sectors, such as office, as opportunities came along, Mr Wylie said.
“We’re also keen on commercial office if there’s distress in the market, particularly in fringe locations.”
Mr Wylie said construction costs were starting to moderate and the relatively simple nature of logistics assets meant they were cheaper to develop.
“I think a lot of the escalation which has been substantial in the last 12 to 18 months is starting to moderate.
“We’re seeing raw material prices come off from the top. Labour constraints … are easing in the construction sector. Industrial’s not an overly complex building spec either. That all helps.”
