This article is from the Australian Property Journal archive
AFTER three years of intensive capital upgrades, a private investment syndicate has sold off its 333 Adelaide Street tower – once considered one of the cheapest buildings in the Brisbane CBD – for $41.75 million.
Stadia Capital, representing a private investor, has acquired the 14-storey B-grade office tower, which has 7,499 sqm of net lettable area on a 911 sqm site located at the northern gateway to the Golden Triangle precinct. The building has a weighted average lease expiry of 4.42 years, with the income underpinned by a 12-year lease to Australian Moreton Education, with other tenants including the Australian Workers Union and Sydney Business Travel Academy.
The Australian Workers Union was a previous owner of 333 Adelaide Street, selling the building in 2016 to private building Icon Constructions with a three-year leaseback for $16.6 million – on a rate of little more than $2,000 per sqm. At the time, the building was about 60% occupied.
Asset manager Costello Group oversaw the $8.35 million in upgrades over the past 36 months. Asset manager of the building and director of Costello Group, Peter Costello said the business were appointed as the asset manager by the private investment syndicate in 2019 with the goal of repositioning the predominantly vacant building.
“Over the past four years, Costello Group has overseen significant capital upgrades to enhance the leasing credentials of the building attracting a significant increase in leasing activity and reducing the building vacancy to 9% whilst securing long-term rental returns.”
JLL data shows the Brisbane CBD was one of the strongest-performing office markets in the June quarter, with 22,800 sqm of net absorption, while Property Council data recorded its vacancy falling from 12.9% to 11.6% in the six months to July.
More than half of the tenants at 333 Adelaide Street have been in the building for 15-plus years.
The building was sold through Mike Walsh and Peter Court of Cushman & Wakefield along with asset manager Peter and Bill Costello of Costello Group.
Walsh said its tenancy mix “ensures stability and a strong foundation for sustained growth.”
“When you combine this with a 9% initial yield and a below replacement cost argument at $5,567 per sqm gross when the average of B-grade office deals in the preceding 18 months were trading at $8,000 to $10,000 per sqm, it makes for a compelling investment that has forward priced risk at an attractive level.”
333 Adelaide Street is strategically positioned to capitalise on the CBD’s public transport options lifestyle amenities, located just 275 metres from Central train station and a similar distance to the Eagle Street ferry terminal and dining, and Queen Street Mall is 450 metres away.
Buyers and sellers of office towers need to make up a 30% gap on price expectations for the market to return to “normal” liquidity, according to MSCI. That gap, together with the impact higher capital costs, dragged down Australian commercial real estate transactions in the June quarter to their lowest level since 2011.
Stadia Capital was established in 2019 by principals Jason Kougellis and Scott Staniforth.
