Melbourne-based fund manager MPG has lifted the value of its property book to more than $1 billion after acquiring three government-tenanted office buildings in regional Australia and a childcare centre in Melbourne.
The four properties – acquired for $33.5 million on a combined yield of 5.4 per cent – will sit within MPG’s flagship Essential Services Property Trust (previously called the Regional Cities Property Trust), which now has $213.5 million of assets.
MPG is seeking to raise just over $14 million from investors to fund the acquisition of the largest of these new assets, a 2628 square metre office building in Shepparton leased to the Victorian Department of Justice, which was acquired for $17.5 million.
The three other properties are a youth skills training centre leased to the Northern Territory government in Yarrawonga (in Palmerston), a Services SA-leased office building in Seaford Meadows (Adelaide) and a 122-place childcare centre in Tarneit, in Melbourne’s west, leased to Aspire Early Education.
MPG was established 20 years ago with the backing of property developer the McMullin Group – set up by the late Spotless founder Ian McMullin – and the Gorman family, who run the business through executive chairman Trevor Gorman and his son, managing director Brett Gorman.
Spread across 14 trusts, MPG’s portfolio includes 10 Bunnings warehouses that account for 40 per cent of its asset base.
Essential services assets and government-tenanted investments in regional locations offering higher returns have also been a focus of the fund manager.
“Bunnings warehouses have been very hard to get,” Brett Gorman told The Australian Financial Review.
“We’re finding it very difficult to stack them up, given investors still expect to sell them on a 4 per cent yield, so we have focused on other areas,” he said.
These include large-format retail property and government-tenanted offices, as highlighted by three of its latest acquisitions.
“We’re on the hunt for any good government assets, as well as childcare centres and large-format retail properties or a Bunnings if they are reasonably priced.”
A focus on higher yielding properties in regional locations has helped MPG generate returns close to 7 per cent for its essential services trust, which will increase to 21 properties when the Shepparton acquisition settles.
Mr Gorman said MPG was well-positioned to cope with the impacts of higher inflation and interest rates.
“We hedge about 50 per cent of our debt, and we’ve made sure our distributions are sustainable through growth in rents,” he said.
“We’re getting some pretty handy increases in rents going forward.”
MPG’s last Bunnings acquisition was a retail warehouse in Rockhampton, bought from Charter Hall for $43.5 million in January 2020.
Last October, MPG added a regional Queensland mall to its portfolio, acquiring Sarina Village Shopping Centre for $13 million.
Reported by Larry Schlesinger Sep 6, 2022 – 5.36pm