This article is from the Australian Property Journal archive
THE Centuria Metropolitan REIT has made a $256 million play to secure the distinctive Nishi office building in Canberra from local developer Molonglo, in a landmark result for the national capital.
The trust announced a $185 million capital raising at $3 per unit, and a further $10 million through a unit purchase plan, to partially fund the acquisition. The raising rounds out a year that has seen major players including Dexus, Mirvac, Cromwell, GPT as well as Charter Hall funds also look to investors for funds.
Family-owned and operated Molonglo built the 27,411 sqm complex in at 2 Phillip Law St in NewActon in 2013 as part of the mixed use community between Canberra’s CBD and Lake Burley Griffin.
Awarded International Project of the Year in 2015 at the Building Awards in London, the Nishi becomes one of only four buildings over the past 10 years in the national capital to sell with a price tag of more than $200 million, trading with a weighted average lease expiry of 7.9 years and at a cap rate of 5.1%.
What is now the NewActon neighbourhood was acquired in 1996 when it was home to a heritage listed hotel, and now has seven buildings. The Nishi contains 68-room Ovolo Hotels offering and a Palace Electric Cinema. Molonglo is currently undertaking a 50-building development with residential and commercial buildings across 14 hectares within the mostly industrial suburb of Fyshwick.
JLL brokered the sale of the Nishi, supported by Colliers.
“The sale attracted strong interest from major domestic and international investors who were keen to acquire one of Australia’s true landmark properties,” selling agent Tim Mutton of JLL said. “Investors were drawn to the strong architectural vision, tenant quality, and diversified income profile underpinned by the Commonwealth of Australia and corporate occupiers such as Clayton Utz and Oracle.”
CMA’s portfolio weighting to Canberra increases from 5% to 16% as a result of the purchase, and federal Government tenants now account for 54% of its portfolio’s rental income, with fixed rental reviews averaging 3.34% per annum.
Total portfolio value increases to $2.1 billion, and WALE from 4.8 years to 5.1 years, while the average building age is lowered from 16.4 years to 15.2 years. CMA also said yesterday it had independently revalued eight of its existing 22 properties as at 31 December 2019, resulting in a gross increase of $30.8 million, or 3.4% on prior valuations.
CMA will undertake a capital raising with an issue price of $3.00 per unit, representing a 4.8% discount to Monday’s close.
Fund manager of CMA, Grant Nichols said the trust “continues to develop its portfolio by introducing newly built, institutional grade assets that support the needs of employees and our tenant customers”.
“Nishi provides excellent amenity for the NewActon and Civic precincts while the large floorplates create an efficient design that can accommodate a range of government or corporate tenants,” he said.
“Canberra’s A grade market continues to demonstrate strong fundamentals with vacancy rates below 5%, the lowest levels in the last decade and balanced supply forecasts that are supported by healthy pre-commitment levels.
“The Civic and NewActon precincts are very well positioned to benefit from future infrastructure plans across the Canberra market, which will open new commuting opportunities that can support employee wellbeing.”
The trust reaffirmed its full year funds from operations guidance of 19 cents per unit and distribution guidance of 17.8 cpu.
