This article is from the Australian Property Journal archive
THE Australian Unity Office Fund (AOF) has furthered the selldown of its assets, offloading a refurbished vacant Parramatta office tower and adjacent car park for $80.5 million – nearly $70 million less than what the asset was valued at just two-and-a-half years ago – just a few months after it pitched plans for a 68-storey build-to-rent tower on the expansive CBD site.
Located about 100 metres from the Parramatta bus and railway interchange and Westfield Parramatta, 10 Valentine Avenue comprises a vacant 14-level A-grade office property that has been refurbished, while 2 Valentine Avenue is a six-level freestanding car park with 282 parking bays, adjacent to number 10 and on the same certificate of title for a combined site area of 3,940 sqm.
The previous anchor of 10 Valentine Avenue, Property NSW, did not renew its lease ahead of the June 2022 expiry, prompting AOF to commission an independent valuation that wiped $29 million off the value of the tower, taking it down from $149.50 million to $120.55 million.
Amid an uncertain office leasing environment and a glut of new supply, Parramatta’s office vacancy blew out to an all-time high of 23.4% during 2023, and by the end of December the Valentine Avenue asset had fallen further in value to $95.5 million – 10 Valentine Avenue was valued at $81.50 million and 2 Valentine Avenue at $14.00 million – with a capitalisation rate of 7.00%. It had been at 5.50% at its peak valuation.
Over the next six months the value fell by another $10 million, to $85.5 million, meaning it has traded on 6% discount to book value.
During that period AOF lodged plans for a 68-storey build-to-rent tower with 611 apartments.
The deal follows multiple asset sales as part of AOF’s “value maximisation” strategy, which have reflected the wash-out of office values as the sector faces structural headwinds and high interest rates.
The AOF asset sales have included 94-96 York Street in Beenleigh for $29.7 million, below what AOF paid in 2021 when it bought the then-new building for $33.52 million, and 150 Charlotte Street in Brisbane for $64.5 million. That price came in above the book value of $60 million, but represented a hefty capital loss for AOF, which paid $105.75 million in 2017 when it acquired the Brisbane CBD office building.
AOF said it will not return any proceeds from the sale of 2-10 Valentine Avenue or 150 Charlotte Street.
“AOF will continue to deliver on its strategy to maximise returns for unitholders,” it said.
A deal has reportedly been in the making for some months for AOF’s 468 St Kilda Road asset in Melbourne, at close to book value of $70 million, and a completed sale would leave it only 64 Northbourne Avenue in Canberra.
Office sales filtering through at discount
Office sales transactions increased from a low base in the June quarter as large institutional sales started to filter through, typically at notable discounts to peak and prior book values.
Among those was another Parramatta asset, at 130 George Street, which Dexus offloaded at 63% below peak valuation.
Meanwhile, Cbus Property is spending $310 million to acquire a 50% share of 5 Martin Place in the Sydney CBD, as reported by Australian Property Journal, which had previously shown a valuation of $405 million two years ago, while Mirvac has just divested the 40 Miller Street, North Sydney office building to Barings for $140 million, and 367 Collins Street in Melbourne for $345 million, with both deals struck at a 20% discount to peak book values.
In Brisbane, Quintessential has bought 240 Queen Street at a 17% discount to peak valuation.
