This article is from the Australian Property Journal archive
GROWTHPOINT has confirmed its first office asset acquisition in Perth, demonstrating a show of confidence in the market’s turnaround.
It has paid $91.3 million to Investa Office Fund for the six-level, A-grade 836 Wellington Street building of 11,973 sqm in West Perth, fully leased to the federal government.
The asset traded at a 6.25% yield, and is used as offices for the Department of Home Affairs with a remaining lease term of 8.3 years and annual rent reviews of 3.75%.
It has 138 secure parking spaces, and has a 5.5 Star NABERS Energy rating and a 4 Star NABERS Water rating.
“This is Growthpoint’s first office investment in Perth and is the product of a long period of due diligence on the Perth office property market,” managing director, Timothy Collyer said.
“Signs of improvements in the Western Australian economy give us confidence that the recovery in Perth is underway. More supportive conditions in the resources industry have led to a stabilisation in falling business investment and while total investment is still subdued, the outlook is more promising.
“Recent employment data, business confidence and business conditions surveys for Western Australia are also much improved and these factors are leading to a better performing Perth office leasing market.” Collyer said.
Recent JLL research showed Perth’s vacancy rate has continued its gradual tightening, from 22.7% at the end the June quarter last year to 20.9% at the end of June this year. PCA data showed CBD vacancies at 19.8% at the beginning of this year, and West Perth at 16.7%.
“The removal of substantial sub-leasing from the market over the past 12 to 18 months, along with a period of subdued development give us confidence that the timing of this transaction will closely meet the bottom of Perth’s office leasing market (both in terms of market rents and incentive levels).
“The long WALE of 8.31 years and ‘AAA’ rated tenant covenant associated with this transaction were both strong considerations in making our inaugural investment into the Perth office market.”
According to Ray White Commercial’s recent Between the Lines report, Perth office sales grew by 15.89% to total $883.99 million over 2017/18, driven by a number of high value transactions.
Settlement of 836 Wellington Street is expected in October. Savills had independently valued the property at the purchase price.
Among the most recent deals were WA-based Acure Asset Management’s $130 million acquisition of Blackrock’s A-grade Optima Centre at 133 Hasler Road in the Herdsmen Business Park.
Fully-leased, the dual-building complex has 16,116 sqm of office space and returns around $9.03 per annum net, with the WA government occupying around 83% by area on a recently renewed 15-year lease.
Meanwhile, Growthpoint issued funds from operations guidance of at least 24.6 cents per stapled security for the 2019 financial year, and distributions guidance of 23.0 cpss, a 3.6% increase in distributions on the 22.2 cps for FY18, within its medium-term target range of 3% to 4% dps growth per annum. It equates to a FY19 payout ratio to FFO of up to 93.5% and a FY19 distribution yield of 6.3%.
Australian Property Journal
