This article is from the Australian Property Journal archive
ASPEN Group has tentatively bought the $200 million Australian Taxation Office building in Adelaide CBD from its managed fund, Aspen Development Fund No.1.
The deal is subject to Aspen obtaining finance. Managing director Gavin Hawkins said the agreement provides for Aspen to purchase the land from ADF and fund the construction of the building that will be developed by ADF.
The total cost to Aspen on completion of the ATO Building is approximately $183.7 million, incorporating holding costs calculated at a rate of 9% pa on funds provided to ADF for the development. The total net cash outlay for Aspen is approximately $164 million, of which the company has already provided $18 million. The debt component of the total funding requirement is expected to be around $115 million.
Aspen has provided guarantees totalling $70 million that support ADF’s obligations with regard to the development of the building. Of these guarantees, $60 million are to the builder and are required to keep the development timetable on track and will be fully extinguished once debt funding is in place.
If finance is not secured and the acquisition does not proceed, then ADF will be required to return to Aspen all funding provided to that time and fund the remainder of the development.
“This would most likely require ADF to source alternative funding or procure an alternative purchaser for the ATO Building,” he warned.
Hawkins said a robust due diligence process was conducted including obtaining an independent expert report and independent valuation to support the arm’s length commerciality of the transaction.
Formerly known as tower 8, the ATO building forms part of the Adelaide City Central development and comprises approximately 36,700 sqm of net lettable area. It is 98.5% pre-committed to the ATO (30,860 sqm) and Australia Post (5,300 sqm) with a weighted average lease expiry of 14.4 years.
The expected starting net operating income is $14.3 million, representing an initial passing yield of 7.8%.
The property has a forecast 5 year equity IRR (post practical completion) of 17% pa.
Meanwhile Aspen has obtained the agreement of the National Australia Bank to extend its existing senior debt facility on a 3 year term with a maturity date of February 2014.
Under the deal, total facility LVR covenant will reduce from 70% to 60% from 1 July 2011. The group’s total facility drawn LVR is currently 64%. This includes the $15 million bank guarantee which forms part of the support Aspen Group is providing to the builder for the development of the ATO Office Building.
Australian Property Journal
