Centuria Industrial REIT (CIP) has cashed out of a lucrative passive investment in western Sydney, making a profit of more than $20 million on an asset it paid just over $13 million to buy.
The listed investor has redeployed the proceeds into three new acquisitions, including its 10th property at Derrimut in Melbourne’s western suburbs, where it now controls a mix of assets over 25.3 hectares worth an estimated $241 million.
It has acquired nine of these properties since 2019, and is considering more as part of a concerted western Melbourne expansion by CIP that aims to capitalise on anticipated continued rental inflation.
CIP also bought two development sites in the outer suburbs of Perth and Adelaide for a combined $12.4 million.
The acquisitions were funded by the sale of what CIP described as a “nondescript” mixed-use office and industrial asset at Eastern Creek in Sydney for $34.5 million, which it bought for $13.3 million in 2013.
“We’ve sold out of a lower-yielding asset in Sydney to redeploy into higher-yielding, more accretive acquisitions and developments to drive earnings,” fund manager Jesse Curtis said.
The latest Derrimut buy – a 5331sq m property costing $12 million on a capitalisation rate of 4.25 per cent – is central to a broader strategy by CIP of acquiring adjoining assets within key infill markets to drive scale and tenant diversity.
“That creates a networking effect where you can use your tenant relationships to move them around a certain area to be able to grow and contract your tenant base,” Mr Curtis said.
It also creates development opportunities.
“We’ve now got a holding of over 25 hectares in Derrimut, the majority adjoining assets, which provides a great future land bank for potential development,” he said.
“CIP would like to continue to build scale in the west Melbourne market [where] we believe there’s a strong platform to achieve rental growth within the precinct.”
Mr Curtis said rental growth in Melbourne’s western suburbs had outperformed the city’s overall industrial market, a scenario likely to continue.
Aggregation is also behind the purchase of a 1.25-hectare lot at Direk in Adelaide’s north for $2.3 million, which adjoins another CIP holding.
It plans to build a 6900sq m industrial facility potentially worth $16 million on the site.
In Perth, CIP paid $10.1 million for a 2.5 hectare brownfield site at Canning Vale on which it will develop a 12,300sq m industrial facility with an estimated end value of $31.1 million.