Cadence Property Group to raise $500m in new fund for east coast industrial precincts

Cadence Property CEO Charlie Buxton aims to build the business to $5bn of assets. Picture: Stuart McEvoy

Fast-growing industrial and development business Cadence Property Group has unveiled plans to raise $500m from big institutions for a new fund looking to capitalise on demand for projects in tightly-held city precincts.

The move is a step up by Cadence founder and chief executive Charlie Buxton, who set the business up a 11 years ago and has since built a presence in the market from offices in Melbourne and Sydney.

He is part of the family behind the MAB empire, but Cadence is his venture and has established a track record of delivering warehousing with the backing of capital partners.

The company is now looking for investors for the Cadence Industrial Development Partnership, which will focus on a differentiated develop-to-core strategy for industrial and logistics sites on the east coast.

It knows the field well after transacting on more than $2.2bn of real estate, with a significant weighting toward the industrial and logistics sector. Cadence is betting its knowledge of the sector and strong capital ties will garner backing for the new vehicle.

Others are also in the market, including Gateway Capital and the likes of Box Capital. Cadence often deals with Australian REITs and has recently acquired assets from Stockland and Dexus.

Its deal-making has doubled its assets under management to more than $850m over the last 12 months. It raised about $489m in new equity commitments as it acquired $400m of assets.

Recent acquisitions included the St Marys Rail Intermodal, a development site in Melbourne’s tightly held south east, as well as six existing warehouses across Melbourne and Sydney. Cadence also recently bought the Aquatica Business Park in Port Melbourne.

Cadence bought the Aquatica Business Park in Port Melbourne earlier this year.

The company is now targeting to grow its holdings to $5bn over the next five years, with the backing of institutions and wealthy investors. To get there, Cadence is active in strategies across core-plus, value-add, develop-to-sell and develop-to-core risk profiles, a far wider range than most managers.

“Over the last decade we have been laser-focused on achieving market-leading performance for our capital partners and delivering excellent outcomes for our tenants and buyers, while also establishing the systems, culture and relationships to prepare the business for sustained growth,” Mr Buxton said.

“The next evolution of our business is to take the things we have done successfully over this period of time and start to apply them at scale. The ambition with CIDP is a good example of this.”

Having focused on developing about $1.5bn of industrial assets over the last decade, largely via a develop-to-sell model, Cadence’s new fund will be part of a shift where assets are instead held after development and managed longer term for income-producing purposes.

Cadence said that after a period of difficult development conditions following a spike in costs, the dramatic rise in interest rates in 2022 and the resulting impact on asset values, the economics of development are starting to return to normal.

“With construction prices retreating from their peak and now stabilising, interest rates and capitalisation rates coming down and continued growth from occupiers starting to take up residual vacancy from the last wave of delivery, the economics of development are starting to become more attractive,” Mr Buxton said.

“While this might not be obvious to the market as a whole, we strongly believe that the time is right to establish a dedicated development-to-core vehicle of scale that can be in a position to buy high quality east coast industrial sites while there is still a level of uncertainty in the market.”

The new fund will be a dedicated industrial development vehicle targeting high quality develop-to-core opportunities, but will look to apply this via a more differentiated strategy that the business has formulated.

Cadence’s integrated capability is the key to it being competitive and Mr Buxton believes it can provide the vehicle an edge in finding sites, developing them and then winning tenants, with a focus on offering a more comprehensive service than what is commonly available.

“We have applied substantial effort in establishing a platform that can execute on complex transactions and provide a market-leading service to our customers. We believe both are central to success in this space and should allow us to both buy well-located sites at a fair price but also compete on speed, precision and enhanced customer service,“ he said. “We see an exceptional opportunity to deliver value for capital partners willing to back quality development in the right locations, with the right execution team.”