This article is from the Australian Property Journal archive
OPPORTUNISTIC investor RF CorVal has acquired two regional office buildings from Dexus for $43.3 million, at over 20% discount to the recent book value and over 35% below the peak.
Corval has acquired two adjoining office buildings at 26 and 28 Honeysuckle Drive in Newcastle from the Dexus Regional Property Fund, in a deal negotiated by Colliers’ Matthew Meynell, Peter Macadam, James Girvan and Catherine Scott.
Meynell said the campaign attracted strong interest from both local and offshore parties with active capital particularly focused specifically on office assets with value-add potential, allowing them to leverage different strategies specific to the property and market.
“Considered the global gateway for Northern NSW and with approximately $6.5 billion in infrastructure both planned and underway, Newcastle has all the fundamentals of a thriving global economy with this deal evidence of continued support and investment in the city’s commercial office market,” Macadam added.
Furthermore Scott said the asset’s build quality, blue-chip occupiers offering attractive yield that was a major drawcard for investors looking at this opportunity.
Buyer RF CorVal’s CIO Oliver Picone said the group has been selectively bidding on office assets as the market starts to bottom out and vendors become more realistic.
“The attraction of 26 & 28 Honeysuckle was the strong existing tenancy profile, high yielding nature of it and ability to add value through active asset management. We are also looking to eventually realise each building individually to enhance liquidity. We have a strong track record in similar office assets and believe the Newcastle market has held up reasonably well post covid, incentives in particular are largely under control,” Picone said.
The sale will see the Dexus fund take a substantial haircut. The assets were valued on their books at $54.70 million in 2023, $61.50 million in 2022 and at the peak, it was on the books at $67.35 million in 2021.
The divestment was a result of unitholders in the fund notifying Dexus at the start of this year, of their intention to have the fund wound up by 30 June 2024.
Prior to this, Dexus had no plans to sell the properties and rushed to launch a formal sale campaign process around March, in the hopes of having the sale concluded prior to the end of the 2024 financial year, despite evidence in the market showing that transactions are taking much longer to materialise.
This week Swiss foundation AFIAA finalised the sale of 628 Bourke Street for $115.8 million to Bayley Stuart after putting the office building on the market in September last year.
Similarly Mirvac sold 367 Collins Street to Asian private equity and real estate company PAG for $345 million and the property was put on the market in 2022 and Mirvac hoped it would fetch around $430 million.
The combined Honeysuckle Drive buildings provide 9,432 sqm of NLA and 165 on-site car parking space, tenants include QBE Insurance, Sparke Helmore, BHP and Nine Entertainment.
The agents said the buildings have undergone an extensive capital expenditure program and provide prime quality improvements in a market where future supply will be constrained due to increasing construction costs.
Colliers research shows that in 2023 over 60% of office transactions sub $150 million were acquired by high net worth or family office investors. This trend is consistent with patterns seen in 2024, with 47% of transactions in Q1 by these groups and 27% via syndicator groups who leverage private capital.
