This article is from the Australian Property Journal archive
THE Centuria Office REIT (COF) is offloading a inner south-west Brisbane building for $37.35 million, consistent with book value, as the ASX-listed trust continues to reshape the “age and quality” of its portfolio.
It said the transaction of 555 Coronation Drive property in Toowong “reflects strong investment appetite for smaller scale, well-located metropolitan offices with strong leasing and sustainability credentials”.
The A-grade building has three levels of commercial office accommodation with a net lettable area of 5,568 sqm, and two levels of basement parking. It is fully occupied and has a 3.4-year weighted average lease expiry, and has a 5.5-star NABERS energy rating and 4.5-star NABERS water rating.
COF acquired the asset in late 2014.
COF has now divested four metropolitan office assets either at or close to their book values throughout FY24, with the previous trio of sales averaging 4.5% lower. The $139 million of non-core office asset divestments have included 54 Marcus Clarke Street in Canberra; 35 Robina Town Centre Drive in Robina on the Gold Coast; and 1 Richmond Road in Adelaide’s Keswick. Sales proceeds will be used to repay debt
“These have been assets where the REIT has extracted value through a series of refurbishments and measures to improve amenity and sustainability efficiencies,” said Belinda Cheung, COF fund manager said.
“The value-add strategies have resulted in strong leasing and occupancy for the assets, which in turn has generated comparably strong investment demand,” Cheung said.
In 2020, the Toowong building saw series of refurbishments including new foyer, lifts, bathrooms and end-of-trip facilities.
The divestment of the 1989-built asset is consistent with REIT’s strategic focus on improving portfolio assets by age and quality, Cheung said.
Most of Australia’s office transactions completed in the past 18 months have been for smaller scale assets below the $100 million threshold amid a broader cooling in the market that has seen buyers and sellers facing off on values, particularly on CBD office towers that were harder hit by lockdowns and the work-from-home phenomenon.
Cheung cited mid-term market tailwinds based on Australia’s population growth and falling supply of new office developments in metropolitan markets.
“Looking forward, development feasibilities have been impaired due to rising construction costs, increased finance costs and softening capital market transactions, pushing economic rents significantly above prevailing rents in the majority of Australian office markets, especially those COF is exposed to,” Cheung said.
COF is anticipating 2.6 million more workers in Australia by 2033, 27% of which will be white collar workers, which is likely to generate up to seven million square meters of additional office space demand.
“This will be particularly beneficial for high quality, existing portfolios that offer affordable accommodation solutions like COF,” Cheung said.
Knight Frank’s Justin Bond and Blake Goddard and CBRE’s Jack Morrison and Adelaide O’Brien were appointed agents on behalf of Centuria.
