This article is from the Australian Property Journal archive
THE Australian Unity Office Fund (AOF) has swung to a $48.4 million full-year loss as valuations of its office buildings took a hit after three major tenants decided not renew their leases.
The result follows a $23.2 million profit last year and last month’s collapse of talks with potential suitor Aliro Group over a $403 million buyout after an extended period of due diligence. AOF has since moved to divest three of the three assets within its $540 million portfolio, including 150 Charlotte Street in Brisbane, 90-96 York Street in Beenleigh and 64 Northbourne Avenue in Canberra.
AOF delivered funds from operations of $30.8 million, or 18.8c per unit, up slightly and above guidance of 18.0 to 18.5c, while distributions increased to $25.0 million, or 15.2 cps were in line with full-year guidance.
It has offered distribution guidance of 2.5 cps for the September quarter, and will provide guidance on a quarterly basis.
Taking valuation hits were 150 Charlotte Street, 2-10 Valentine Avenue in Parramatta, and 30 Pirie Street in Adelaide, where Telstra – which occupies 21 levels of the 23-level A-grade tower – will be exiting.
Properties at 468 St Kilda Road, Melbourne, 5 Eden Park Drive, Macquarie Park and 64 Northbourne Avenue increased in value as a result of strong leasing outcomes, improved occupancy and capitalisation rate compression.
The portfolio’s weighted average capitalisation rate was 5.69%,
AOF offloaded 32 Phillip Street in Parramatta in December at a 5% premium to book value.
Net tangible assets fell from $2.71 per security to $2.26.
Occupancy across the portfolio tumbled from 95.7% to 84.4%, largely due to the exit of the Parramatta building’s major tenant. About 14,100 sqm of leasing was completed, with both 5 Eden Park Drive and 64 Northbourne Avenue being taken to full occupancy.
AOF said proceeds from the sales of the Brisbane, Beenleigh and Canberra assets would initially be used to repay debt and, as be recycled into the repositioning and refurbishment strategies at 2-10 Valentine Avenue and 30 Pirie Street.
Gearing lifted from 28.4% to 30.$, with $170.3 million of debt drawn against a $250 million facility.
