This article is from the Australian Property Journal archive
WARREN Ebert’s Sentinel Property Group and Growthpoint are backing the ever-reliable Canberra office market, each snapping up a building in the country’s capital at a discount.
Following a successful $40 million capital raising, Sentinel Property added a second Canberra office to its portfolio with the A-grade commonwealth government-leased 18 Canberra Avenue, Forrest.
Sentinel paid $72 million for the property for 34% below the replacement cost from Charter Hall, who purchased the asset from Doma Group in 2021 for $98.5 million.
Doma delivered the 9,568sqm four-storey office in 2012, with the Department of Human Services occupying from 2015 on a $100 million 15-year lease.
Designed by Colin Stewart Architects and May + Russell, the building boasts a 5-star NABERs energy and 5-star Green Star rating.
Sitting less than 500 metres from Parliament House, the property also features 250 car parks.
“Canberra is Australia’s fourth largest office market and boasts the lowest vacancy rates across all capital cities of 8.3 per cent. Over the next five years, 90 per cent of new office space currently in development is already pre-committed,” said Warren Ebert, CEO at Sentinel.
“With 2.9 per cent unemployment and a high 70.64 per cent workforce participation rate, Canberra continues to outperform the national average. The national capital’s population is projected to surge from 470,000 to 535,000 by 2034, driving demand for premium office space.”
The acquisition follows Sentinel’s first Canberra office purchase in 2021, having paid $83 million for Scarborough House in the Woden Town Centre.
“There is also strong infrastructure investment with the ACT and the federal governments having committed $1 billion to Canberra’s light rail expansion, with a proposed plan of Stage 2b for the rail to come within 200 metres of the Doris Blackburn Building,” added Ebert.
Meanwhile Growthpoint has spent $90.05 million on the B-grade recently refurbished 2 Constitution Avenue, reflecting a circa 9% yield.
Growthpoint is also launching a single asset trust for the property, the Growthpoint Canberra Office Trust. With a forecasted average 9% annualised distributions and a forecast internal rate of return range of 15-16%.
“We are pleased to have secured this counter-cyclical office investment opportunity, with a clear strategy to drive income and enhance asset value via Building Electrification and the Net Zero strategy,” said Sam Sproats, funds management executive director at Growthpoint.
“We believe acquiring at $4,620 per square metre represents deep value buying, with replacement cost approximately 80% above the purchase price.”
Spanning 19,465sqm of lettable area across two towers, the property is currently 96% occupied with 88% of the passing income secured by Government and Government affiliated tenants.
Growthpoint has entered into binding agreement with ISPT to purchase the 1986-developed asset.
ISPT added the property to its Core Fund in 2004, refurbishing the asset in 2022, which was at its peak valued at circa $130 million.
ISPT has had recent success in the market, with the Department of Veteran Affairs signing on to a long-term lease across six levels at its Pathway Place asset in Canberra, following the property’s recent $67 million upgrade.
Ross Lees, CEO and managing director at Growthpoint, also highlighted the strength of Canberra’s office market, noting a one of the lowest CBD vacancy rates in the country at 9.5%.
This in addition to expected growth in government staffing levels of around 9% in the 2024-2025 period, which should underpin the strength of the asset.
With a recent Knight Frank Canberra Office Market report revealing the city’s office market vacancy was up from 8.3% to 9.5% over the first half of 2024, with total stock up to its highest level on record at 2,397,006 sqm.
“The Growthpoint Canberra Office Trust represents progress in our strategy of growing our funds management business, leveraging our management expertise to create attractive investment opportunities for our syndicate investors,” added Lees.
Settlement for 2 Constitution Avenue, Canberra is anticipated for early on in the 2025 calendar year.
Another Canberra office recently sold at a discount, with Australian Unity Office Fund selling off its assets including the 64 Northbourne Avenue office building in Canberra with a 35%-plus haircut from the peak book value.
These transactions show the office market is headed for a busy finish with a flurry of activity across the eastern seaboard, including:
- Australian Unity’s recent sale of 468 St Kilda Road in Melbourne, to Bayley Stuart Capital for $41.75 million;
- Aware Real Estate and Navigator Property Group’s $215.5 million acquisition of 145 Ann Street from Dexus and the Canada Pension Plan Investment Board;
- US giant BGO’s buying 10-20 Bond Street from Mirvac and Morgan Stanley for $580 million;
- Singapore-listed companies UOL Group and Singapore Land Group (SingLand) bought Brookfield’s half-stake in 388 George Street for $460 million on a yield of 6.2%;
- German investment powerhouse Real I.S. Group snapped up 8 Windmill Street, Millers Point for $47.75 million from Melbourne-based property investment manager Marks Henderson;
- Hong Kong toy billionaire Francis Choi’s $196.4 million sale of 1 Castlereagh Street in the heart of Sydney’s CBD;
- Mitsui Fudosan’s acquisition of a circa 66% stake in 55 Pitt Street, Sydney for $1.3 billion;
- Keppel REIT buying a 50% stake in 255 George Street; Sydney for $363.8 million and PAG purchasing 367 Collins Street, Melbourne for $301 million.
- Mirvac 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.
- 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. That tower had previously shown a valuation of $405 million two years ago.
Meanwhile privately-held US Connecticut-based firm Proprium Capital Partners is running the ruler over 20 Bridge Street, to buy it from Francis Choi for around $270 million. Choi’s Early Light International is offloading 20 Bridge Street, which will soon be vacated by the ASX, for below what he paid. Choi purchased the building from Malaysian pension fund Kumpulan Wang Persaraan in 2017 for around $330 million and $350 million.
