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An office building currently under construction in the Brisbane suburb of Cannon Hill will be acquired by ASX-listed Irongate Group (ASX: IAP) for $36 million and leased to multinational jewellery retailer Michael Hill (ASX: MHJ) on completion.
In conjunction with the sale, Irongate has entered into a development agreement with the previous owner of the land, Cannon Hill Developments (CHD), under which the seller will lead development of the office building on behalf of the new owner.
The purchase consideration comprises an initial payment of $3.897 million to CHD, with the balance to be progressively paid to the seller under the development agreement.
Construction is due to complete in July 2022 and Sydney-based IAP will fund the acquisition via its existing debt facility.
Once built, the office will comprise 3,520sqm of lettable area with two levels of underground car parking, and occupied on a 10 year lease by Michael Hill as its global head office.
"The acquisition aligns with IAP's strategy of investing in well-located, high quality asserts that provide a sustainable income stream for investors and will deliver IAP with a brand-new building with 10 years of income growing at 3 per cent per annum," IAP CEO Graeme Katz said.
"The acquisition continues our recent theme of acquiring assets in Brisbane, a market we believe currently offers relative value to both Sydney and Melbourne.
"Together with the industrial acquisitions in Brendale, Pinkenba, Kingston and Morningside, IAP has deployed close to $100 million over the past six months in Brisbane at an average yield of 5.5 per cent with a weighted average lease term of more than eight years."
The acquisition comes just over five months after Irongate entered into a contract to buy an industrial facility in Pinkenba near the city's airport for $24.75 million.
The property on 153 Main Beach Road was built in 2018 and is currently leased to automotive e-commerce group Grays with a lease expiry in March 2028.
The move was hot on the heels of the completion of a $15.62 million acquisition in Brendale in January, a month when 360 Capital REIT (ASX: TOT) also acquired a 9.18 per cent strategic investment in Irongate for around $78.6 million.
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