This article is from the Australian Property Journal archive
CENTURIA Capital has bought another government-leased building for a single-asset fund, paying $62.75 million for an A-grade Port Adelaide office building fully leased to the South Australian government.
Acquired on a yield of 4.6%, the property will sit in the close-ended, unlisted Centuria Government Income Property Fund No. 2 (CGIPF2) with an initial five-year term returning a starting 5.25% distribution yield.
Centuria is hoping to raise $35 million for the purchase of the six-level, 6,393 sqm building located at 21-25 Nile Street, on the corner of Robe Street. It is occupied mostly by Shared Services SA with some Urban Renewal Authority staff and has an 11.1-year weighted average lease expiry with 3% fixed annual reviews.
It was constructed under the Labor government to sit within the state-backed rejuvenation precinct and house 500 relocated public servants on completion in 2018, although the move was met with some resistance by staff. The Liberal government altered the arrangement after taking power that year.
The rejuvenation project is a 20-year initiative that is anticipated to attract up to 8,000 additional residents and 1,500 construction jobs.
Centuria has just acquired an A-grade Footscray building in Melbourne leased almost entirely to the Victorian government for $224 million. Centuria is also holding this asset in a single-asset fund, and raised $133 million to back the purchase.
“Centuria remains confident in Australia’s metropolitan and near city office markets, especially those that benefit from long-term Government-backed infrastructure projects,” Jason Huljich, Centuria joint CEO, said.
He noted that Port Adelaide is the gateway to the federal government-backed Osborne naval shipyard, which is earmarked to deliver $90 billion of naval defence infrastructure over 50 years.
“Nile Street provides a compelling investment proposition with the building fully leased to the SA government, providing strong tenant covenants and resilient revenue streams. Additionally, its exemplary sustainable features, and being a young property, prevents capital expenditure leakage, providing value for investors.”
It also has a 6-Star NABERS energy rating and 6-Star Green Star Design rating.
“We are confident in Adelaide’s commercial real estate market, which is underpinned by strong employment, regeneration and infrastructure projects,” Ross Lees, Centuria head of funds management, said. Centuria’s South Australian portfolio already included four office buildings, 10 industrial facilities, three daily needs retail as well as agriculture, childcare and healthcare properties.
Knight Frank’s Guy Bennett and Cushman & Wakefield’s Leigh Melbourne, Nick Rathgeber, Mark Hansen and Josh Cullen acted on behalf of vendor Charter Hall.
The Charter Hall Direct managed fund, PFA bought the site in 2017 in a fund-through deal.
Steven Bennett, CEO of Charter Hall Direct the sale proceeds would be used to realise returns for investors and re-deploy capital into new acquisitions and fund existing developments, such as 60 King William Street, in the Adelaide CBD, where Services Australia has committed to anchor the new $450 million tower.
PFA recently bought a 50% stake in $146 million Newcastle building anchored by the New South Wales government.
Government-tenanted buildings have been prominent among office deals. Charter Hall also bought the six-level campus-style Services Australia in the ACTs Tuggeranong for $306 million, while it picked up Australian Taxation office buildings in Melbourne’s Box Hill, for $230 million, and the Albury city centre for $85 million.
Sentinel Group has just added the nation’s control centre for the COVID response to its portfolio for $83 million, and ASX-listed Irongate Group paid $74 million for the home of the federal government’s Australian National Audit Office.
