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Montague, 7-23 Dunmore Drive, Truganina

Investment

7-23 Dunmore Drive, Truganina is a 17,000sqm state-of-the-art temperature controlled warehouse facility located in Truganina, Victoria. The investment was structured on a fund-through sale and leaseback to Montague Group for 20 years and had surplus land for future expansion. RF Corval acquired the property for the Value Active Fund, a club of Australian institutional investors, in 2014 for $48m, with construction completed in December 2014.

Strategy

RF CorVal was able to negotiate favourable lease-back terms with Montague Group to enhance the appeal of this investment on exit, including a double net structure, parent group guarantee, enhanced bank guarantee and attractive terms for future expansion (yield on cost of 8.50%). RF CorVal also mitigated the risk of the fund-through structure by agreeing a fixed price contract, securing substantial guarantees from the builder, paying on a cost-to-complete basis and deferring the payment of any development profit until practical completion.

Outcome

RF Corval was able to secure this investment, on behalf of its institutional fund, at attractive pricing reflecting a yield of 8.0% and a total cost of $48m. In December 2017, this property was sold for $66m delivering a 22.2% IRR to the investors.