This article is from the Australian Property Journal archive
COMMONWEALTH Property Office Fund has recorded a marginal 1.2% increase in the value of its overall real estate portfolio but its Perth assets have suffered set back.
The fund independently revalued 14 assets over the three-month period to June 30 2010, resulting in a $21.7 million increase on prior book value.
CPOF’s 45 Pirie Street Adelaide property recorded the largest increase of 8.7% to $76 million, reflecting the completion of works associated with the SA Government lease which has been taken into account by the independent valuer.
Other assets which recorded increases included 259 George Street Sydney, 2 Southbank Boulevard Melbourne, 225 George Street Sydney and 36 George Street Burwood, reflecting an overall improvement in confidence in office markets and firming investment yields.
But the value of the fund’s Perth assets declined, the largest was recorded in 1 Mill Street which declined by 5.3% to $30 million; followed by 5 Mill Street by 4% to $33 million and 197 St Georges Terrace by -0.2% to $92 million.
But fund manager Charles Moore said the valuation uplift reflects an overall improvement in underlying office market assumptions.
“Increased transactional activity has provided independent valuers with greater comparable evidence for investment yields and asset values. The latest round of revaluations in the CPA portfolio reinforces that yields for quality Australian office buildings have stablised,” he added.
Meanwhile the portfolio weighted average capitalisation rate has firmed slightly from 7.8% at 31 March 2010 to 7.7% at June 30 2010 and the portfolio weighted average discount rate remains unchanged from that at 31 March 2010, at 9.4% as at June 30 2010.
The June 2010 quarter revaluations follow the $28.0 million increase on prior book value recorded in the March 2010 quarter when 10 of the fund’s assets were revalued. The fund’s gross assets increased to approximately $3.1 billion at June 30 2010, up from $3.0 billion at December 31 2009, taking into account the mark to market of derivative financial instruments.
The fund’s Net Tangible Asset backing per unit is expected to remain stable at $1.14 at June 30 2010. Gearing is expected to increase from 22.2% at March 31 to approximately 23.5% at June 30 2010.
Head of property Darren Steinberg said whilst it is pleasing to see the firming of investment yields in some assets, he added that the underlying office market fundamentals will continue to be challenging in the short term.
Steinberg said as vacancy levels reach their forecast peaks in each market, he does expect to see further growth in asset values.
Australian Property Journal
