This article is from the Australian Property Journal archive
THE Centuria Office REIT (COF) has sold a Canberra office building for $23 million, at a 1.7% discount to book value, while the trust has completed a $225 million debt refinancing.
COF had 54 Marcus Clarke Street on its books at $23.4 million, on a 7.0% capitalisation rate and 100% leased.
It has acquired the property in 2015 for $14.2 million, and the property delivered over $7 million in income returns during the period of ownership, reflecting an IRR of about 11%.
“54 Marcus Clarke Street is one of COF’s oldest buildings and this strategic sale will improve COF’s overall portfolio asset age and quality,” it said.
Sale proceeds will be used to repay debt. Settlement is expected to occur in 2024.
COF fund manager and Centuria head of office, Grant Nichols said the divestment “demonstrates solid ongoing investment demand for quality assets that are of an accessible size, enabling a wider pool of potential investors”.
“COF is well positioned with a diversified portfolio of quality and affordable accommodation solutions.”
After a dearth of transactions in the wake of COVID and rising interest rates, the office sector is undergoing a period of price rediscovery, with major CBD towers broadly losing value in the June round of valuations.
COF’s debt refinancing is across $175 million of existing loan facilities and an added $50 million of new liquidity.
Nichols said the well-supported lender appetite for COF is reflective of the REIT’s high 97.3% occupancy, staggered 4.1-year weighted average lease expiry and young average building age of around 17 years.
“As a result of this proactive capital management, COF benefits from a longer-term debt expiry profile with immaterial change to debt margins.”
Its all-in cost of debt is expected to remain elevated compared to recent past periods and be higher in FY24.
