This article is from the Australian Property Journal archive
INVESTA Office Fund has bought a Perth office building from AMP Capital for $82.375 million, as part of its strategy to increase its foothold in the Perth office market.
This is only IOF second property, which is heavily weighted to the Sydney and Brisbane office markets. IOF owns the Wellington Central office building at 836 Welling St Perth.
The fund’s latest purchase, 66 St George’s Terrace Perth is a 11-storey 11,447 sqm A-grade 3-star NABERS rated office building. The price reflects an initial yield of 8.1% after acquisition costs, and is forecast to generate additional earnings of 0.4 cents per unit in FY13.
The property also includes two ground floor retail tenancies totalling 180 sqm, 66 car bays and ample storage areas over two secure levels.
“Due to the strength of our balance sheet and low gearing levels the Fund is well placed to acquire assets at what is an opportune time in the cycle. IOF is underweight in Perth, which is currently the strongest office market in Australia,” IOF fund manager Toby Phelps said.
The building is currently let at a low average rent of $550 per sqm, and has a 1.8 year weighted average lease expiry.
“This asset will improve portfolio diversification and allow the fund to capture short-term rental growth potential from the current low vacancy levels and strong tenant demand in this market.
“The short lease expiry profile will allow the fund to capture value uplift through crystallising the estimated rental reversion of 15%,” Phelps added.
There are 11 tenants with the following four largest tenants comprising 74% of the building by income: Manpower; ASIC; Subsea 7 and Suncorp. Lease expiries by rental income are 54% in FY13, 4% in FY14 and 37% in FY15.
The acquisition will be funded from existing debt facilities and gearing post acquisition will be 25.5%, the bottom of the fund’s 25% – 35% target range.
Settlement is scheduled to take place on or around the 31st of August 2012.
Property Review
