Gaw Capital has formed a joint venture with Abacus Property Group to invest in industrial assets in key Australian cities.

The Hong Kong-based investment manager and the listed Australian real estate investment trust (REIT) bought their first asset last month in Melbourne and are in due diligence on a second property in Sydney.

Gavin Lechem, Abacus head of specialised capital, told IPE Real Estate the intention was to build a portfolio of industrial properties.

Lechem said the first purchase, located on the western outskirts of Melbourne, would fall vacant next year and give the new owners an opportunity to add value and reposition the building. 

While the Australian market is, as Lechem described, “toppy”, buyers looking for value are still picking up assets with prospects of strong returns, he said.

The Melbourne industrial building, for example, was bought below replacement cost at AUD30m (€20.5m).

Abacus is seen as one of Australia’s best-performing real estate managers. 

Originally a retail syndicator, the business now partners with sophisticated capital.

Lechem was recruited in 2010 to source third-party capital, and Abacus has since attracted foreign capital partners, including Heitman, KKR and Goldman Sachs.

Abacus has a long-term relationship with the Kirsch Group, controlled by South African billionaire Nathan Kirsch, who holds a 49% stake in Abacus.

“We are not fund managers,” Lechem said. “We are a real estate asset manager and co-invest with our partners.”

Abacus’s partnership with Heitman has assembled a portfolio of five assets, some of which have since been sold.

In July, Abacus assisted Seoul-based FG Asset Management in the purchase of an office building in a Sydney inner-city suburb for more than AUD113m.

Abacus has also partnered with KKR to buy a shopping centre in Queensland and an office building in Melbourne, with a combined value of AUD224m.

Last August, Goldman Sachs and Abacus jointly bought an office building in North Sydney for AUD115m.

The volume of assets managed by Abacus on behalf of third-party investors peaked at AUD1.4bn.

Following several sales of assets, the number stands at AUD1bn today.