Straits Real Estate cashes out of Visy’s distribution centre in a $52.7m sale

Visy’s glass distribution centre at the inner Adelaide suburb of Kilkenny.

Singapore’s Straits Real Estate has quietly agreed a deal to offload Visy’s glass bottle distribution centre in Adelaide’s inner west for $52.7m.

Details of the proposed sale were released to Singapore’s stock exchange by parent company The Straits Trading Company, with the price representing an 18 per cent discount to the most recent valuation of $64.3m reported in December.

The identity of the buyer was not disclosed but the deal is one of the state’s largest industrial moves.

Visy’s purpose-built distribution facility stretches across 37,809 sqm of net lettable area in the industrial suburb of Kilkenny.

In 2022, Straits Real Estate unveiled plans to boost its industrial property portfolio in Australia to more than $1bn after making its first foray into the Australian logistics sector in 2018 when it launched a specialist fund with joint venture partner Commercial & General.

After growing the fund to close to $500m, Straits took over full ownership in 2022, acquiring the 20 per cent stake held by the Adelaide-based developer. The portfolio included eight properties across South Australia and Victoria, occupied by tenants including Coca-Cola, Raytheon, Siemens, Incitec Pivot and Visy Glass.

The Straits Trading Company said the sale of the Kilkenny site was in line with its strategy of “redeploying capital from its existing property portfolio of high quality but low yielding investment properties into potentially higher return real estate opportunities.”

Investor appetite and occupier demand for industrial assets has surged since the onset of Covid-19, fuelled by the rise in e-commerce activity, onshoring and a shift in global supply chains.

Straits Real Estate’s Australian logistics portfolio is managed locally by Terre Property Partners – an Adelaide-based asset and development management firm in which the Singaporean investor holds a 40 per cent stake.

Building of a $100m manufacturing facility, for UK pharmaceutical company Noumed Pharmaceuticals, recently commenced at Terre’s Nexus North Industrial Estate in Adelaide’s north, while Straits Real Estate last year bought two more industrial development sites in Adelaide and Melbourne. In its latest annual report for calendar 2023, the Singaporean investor said that while rising interest rates in Australia “increased financing cost for property investors further and was a significant dampener for general business sentiment”, its logistics portfolio continued to perform well, with “strong occupancy and steady income”.

“In a year of waning business conditions and global uncertainties, Straits Real Estate’s main focus was on stabilising the performance of its portfolio,” the report said.

“Notwithstanding the lacklustre market sentiment, Straits Real Estate continued to actively evaluate opportunities for capital recycling and exited several matured investments in the year. “Capital was reinvested into new opportunities in the Australia logistics property sector, and into certain office properties to enhance their market competitiveness.”

Straits Real Estate owns office buildings in Sydney, Perth and Melbourne. Its La Trobe St, Docklands property has had an $8.6m upgrade.