Burstone Group, formerly Investec Property Fund, said on Wednesday that it has teamed up with Australia’s Phoenix Property Investors to buy a portfolio of industrial properties in Sydney for A$57.25m, bulking up its exposure in the Asia-Pacific region.
The deal will see APAC-focused private equity group Phoenix Property Investors own 80%, with the Irongate JV investing 20% equity and providing asset management services.
The properties are in Smithfield, a sought-after industrial area in western Sydney, where vacancy rates are as low as 0.2%. The portfolio consists of eight buildings with multiple tenants and a total lettable area of about 17,500m². The average expiry is 1.7 years, which offers the opportunity to capture higher rents as the market tightens.
The transaction is part of Burstone’s strategy to diversify its portfolio geographically and reduce its reliance on its own balance sheet. Burstone, which has R37bn of assets on its balance sheet and R5.4bn of third-party capital under its custody, has investments in Europe, Australia and at home, with about 55% of its assets being offshore.
Burstone CEO Andrew Wooler said the group aimed to increase its offshore exposure to 70% and its third-party capital from 5% to 25% of its assets under management over the next three years, with Australia leading the way behind Europe and SA.
“The acquisition supports the group’s capital-light strategy, which aims to leverage skills within the business to provide new sources of income through management and performance fees,” said Wooler.
Phoenix, a private equity firm with $7.9bn of assets under management, is an existing investor in one of the Irongate properties and this investment will mark Phoenix’s second in Australia through its Phoenix Pan Asia Core Plus Investments Fund, which targets low-risk, high-growth properties in the region.
Irongate Australia Fund Management is a 50/50 joint venture between Burstone and Irongate Australia. Irongate manages nearly to $500m in equity in various property sectors on behalf of investors.
Graeme Katz, CEO of Irongate Australia, said the joint venture was focused on acquiring properties that met its investment criteria of being in prime locations, having large land holdings, generating income and having upside potential.
“Our investment philosophy focuses on low-risk infill sites, acquisitions at below land-and-replacement cost, underutilised with strong positive rental reversion, all of which this acquisition is set to deliver,” said Katz.
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