About This Investment
In July 2017, Stronghold established Mulgrave Property Trust No 11, a closed-ended investment vehicle and the first with assets located in Victoria. The Trust purchased two modern, multi-tenanted office buildings, situated on two titles at 13-15 Compark Circuit Mulgrave, VIC for $21.5M.
Following the acquisition, the Stronghold team sought to lease the vacant area and establish a healthy working relationship with existing tenants. Tenants appreciated this proactive approach with PZ Cussons agreeing to take up their 5-year option early, extending their lease until 2023. In addition, a new tenant, Service Stream was secured and signed a 3-year lease plus options over the last remaining vacant area at 13 Compark Circuit.
14.98%p.a
8.27%p.a
Trust Highlights
- DATE OF PURCHASE:June 2017
- PURCHASE PRICE:$21,500,000
- PURCHASE YIELD:7.55%
- DATE OF SALE:March 2020
- SALE PRICE:$27,820,000
- SALE YIELD:6.25%
- AVERAGE CASH YIELD:8.27% p.a
- INTERNAL RATE OF RETURN:14.98% p.a
In the four months after acquisition, the property was fully leased, and WALE was increased from 3.1 to over 4.5 years.
In the four months after acquisition, the property was fully leased, and WALE was increased from 3.1 to over 4.5 years.
The uplift in the property’s value was well received by investors, as was the initial cash yield of 8.00% pa that subsequently increased to 8.30% p.a then 8.50% p.a. While distributions to Stronghold’s supportive investors were growing, the team continued to work with tenants, completing numerous refurbishments. In mid 2019 following a valuation of $26.1m, Stronghold renegotiated with Carter Grange to extend their lease for another five years. This included a refurbishment of their tenancy which maximised the value add opportunities available for the property at that time. The other main concern was the significant amount of new office supply proposed within the surrounding area in the next five years. This outlook presented a genuine downside risk for market rents and re-leasing prospects into the future. Therefore, when combined with aging mechanical services in the building, the best outcome was to capitalise on the current leasing profile and crystalise the profit for investors, allowing them to redeploy into new opportunities.
With the approval of investors, the property was subsequently taken to the market in September 2019. Following an open market campaign via the teams at Knight Frank and Dawkins Occhiuto, a total of four offers were received. Negotiations with the preferred purchaser were concluded in late November with unconditional contracts exchanged at a sale price of $27,820,000 less adjustments at settlement. The property settled on the 28th February 2020 and returned a great result.
We would like to thank all investors that were involved in supporting us in this trust.