This article is from the Australian Property Journal archive
PERTH-based property funds manager Quadrant Investments has acquired a Midland office building leased to the Western Australian government for a new trust, after closing a first round of equity raising oversubscribed late last month.
The new QI Diversified Income Trust No 1 is forecast to deliver a commencing return to investors at 7.0% per annum following its acquisition of 2 Keane Street.
Quadrant said the trust intends to add additional properties across various sectors and locations, which will also see future rounds of equity raising, aiming to achieve a combined value of up to $40 million once fully invested.
Located on the corner of Keane Street and Great Eastern Highway, about 17 kilometres north east of the CBD, 2 Keane Street has a modern two-storey office building of net lettable area of 1,367 sqm with secure basement car park for up to 33 vehicles, plus end of trip facilities and bike parking.
It was purchased for $7,250,000 through a campaign managed by Savills’ Barney Dear, who said the property was highly sought after due to its long-lease to the AA+ rated tenant.
Over 115 enquiries were received and the sale price represented an initial yield of 5.78% and a 6.25% reversionary yield on market rent.
“This asset not only delivers an A-grade tenant in the WA State Government until July 2028, but also delivers a strategic central location within the Midland city centre – a locality that has benefited already from almost $1.5 billion worth of investment from the government and private sector, with more to come,” Dear said.
Quadrant Investment’s managing director Phil Fogliani said the acquisition provides the trust with a stable income from a reliable tenant until July 2028, “a highly prized attribute in the current landscape which has seen periods of uncertainty and continuing low returns below current inflation from bank term deposits”.
“Our assessment of the economic rent required to justify the construction of a new building of comparable quality in the Midland city centre, including matching its exceptional 1 per 41 sqm car parking ratio, is significantly higher than the current passing rent, which will not only improve the prospect for rent growth upside but also in retaining the existing tenant.”
“The asset will also deliver the trust a significant tax-deferred component to its distribution income owing to its attractive depreciation benefits,” he added.
“A number of the current first round investors in the trust have already indicated their wish to increase their investment and we are also taking registrations of interest from investors, including those who missed out, for our planned second raising.”
The acquisition and the establishment of the new trust adds to Quadrant Investments’ growing portfolio of assets under management, which has grown to almost $60 million in just under 36 months.
