This article is from the Australian Property Journal archive
INVESTA Office Fund has bought a 50% interest in Piccadilly centre from Stockland for $194.25 million.
The price represents a 6.9% yield on cost after acquisition costs and a cap rate of 7.1%.
Located at 133 Castlereagh St in the heart of Sydney’s CBD, the complex comprises two office buildings, a 32-storey tower and a B-grade tower (42,000 sqm), which is connected by a two-storey retail shopping centre as well as a 229-bay car park.
The complex has a long weighted average lease expiry of 5.3 years, 93% occupancy and attractive net office rents ranging from ~$350 per sqm to ~$690 per sqm, with annual fixed increases.
Stockland recently renewed its lease at the complex, which will see the company continue its occupancy of nine floors of the 32-storey Piccadilly tower for the next 10 years.
Stockland’s CEO Mark Steinert said the sale price is in line with 31 December 2013 book value and the transaction reflects the company’s selective capital partnering strategy.
“This is a good example of how we’re utilising capital partnering to improve our risk-return profile. This allows us to actively recycle and redirect capital to pursue new, accretive opportunities.
“The transaction will establish the second joint-venture between Stockland and Investa in the last two months, following Investa Commercial Property Fund acquiring a 50% stake in 135 King St and the Glasshouse Retail Centre, fronting Pitt St Mall in Sydney. Stockland retains its 50% stake in 135 King St and Glasshouse,” he added.
IOF’s fund manager Toby Phelps said as a result of the acquisition, the FY14 FFO guidance has been upgraded by 0.2 cents per unit to 26.3 cents per unit, representing 5% growth on FY13.
“The asset is highly complementary to IOF’s existing Sydney portfolio in terms of location, income profile and rental price point. Value-add opportunities exist in the short-term through the lease-up of vacant space and the opportunity to capture rental upside.
“The surrounding area has recently undergone significant improvement with the development of 161 Castlereagh St, home to ANZ and Freehills, and the upgrade of Pitt St Mall. Longer term opportunities exist to make more of this strategic location,” he added.
The acquisition will be funded with available debt facilities, and 31 December 2013 pro forma look-through gearing post settlement will increase to 29.2%.
“The purchase of Piccadilly brings IOF’s Australian acquisitions to approximately $1 billion in less than two years, redeploys the proceeds from the sale of DOF, and is in line with our strategy of reinvesting offshore proceeds into high quality Australian assets with attractive risk adjusted returns. We are excited to be growing our relationship with Stockland and exploiting the complementary skills that sit across our two organisations,” Phelps said.
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