Property Development

Centuria Property Funds Limited sells Parramatta office for $105.3 million

Centuria Property Funds Limited sells Parramatta office for $105.3 million
Written by The ReReport
As seen in the Source link, written by on 2019-12-03 18:32:04

Centuria Property Funds Limited paid $45.05 million for 2-10 Wentworth Street, Parramatta, in late 2014.


Centuria Property Funds Limited has sold a Parramatta office at 2-10 Wentworth Street to an Asia-based investor, banking $105.3 million.

The property was the sole asset in the closed-end,
unlisted Centuria 2 Wentworth Street Fund, which had a five year term.

CPFL – a subsidiary of the ASX-listed Centuria Capital Group (CNI) – paid Charter Hall $45.05 million for the A-grade Parramatta building in December, 2014.

Just last week we reported that Charter Hall’s Direct PFA Fund sold the office across the road: 9 Wentworth Street was purchased by a private investor for a headline $64.25 million.

The total return to investors for 2-10 Wentworth Street is 186 per cent

Of the 2-10 Wentworth Street sale, CNI joint chief
executive officer Jason Huljich said Fund investors will receive a total return
of 186 per cent “including an average distribution return of 9.2 per cent”.

The internal rate of return (IRR) over the Fund’s five-year
term is 25 per cent.

CNI will bank a performance fee of about $9 million following
settlement of the office in the first quarter of 2020.

“When we purchased Wentworth Street in December, 2014, our view was that the Parramatta office market was poised to benefit from a number of positive factors, including improving infrastructure links, the decentralisation of NSW government departments and the overall gentrification of the area” Mr Huljich said.

“At the same time, A-grade office vacancy was below 1 per cent which we believed could support greater tenant appetite for quality office products, which in turn would mean upward pressure on rents – which the Parramatta market has seen in recent years”.

Built in 1989, the nine-level building contains 10,940 square metres of lettable area.

It occupies a 2339 sqm block about 24 kilometres west of the Sydney CBD.

Mr Huljich added that during the life of the Fund, CNI completed leasing transactions for over 90 per cent 2-10 Wentworth Street (so, affecting 9807 sqm).

The rental, he said, increased 34 per cent from an
average $497 per sqm/pa, to $617 per sqm/pa.

Cushman and Wakefield’s Steve Kearney, Simon Fenn, Mark Hansen and Claire Zouroudis, with CI Australia’s Bevan Kenny and Andrew Hunter marketed the Parramatta office.

Centuria has been an active buyer this year

Last week we reported that Centuria Diversified Property Fund (CDPF) outlaid $27.8 million for twin offices in Melbourne’s south east Mulgrave.

A month earlier CDPF spent $65.4 million on an office in Brisbane’s inner north east Bowen.

In May, it paid $35 million for Canberra’s Optus Centre.

In July, Centuria Industrial REIT paid $22.8 million for a North Geelong distribution centre leased to Quicksilver.

Last October, the same fund spent $42 million on a 5.6 hectare high-profile logistics centre at 1 International Drive, Westmeadows, abutting the Tullamarine Freeway near Melbourne Airport

CNI, with a joint venture partner, businessman Paul Lederer, last year invested $645 million on a portfolio of four offices, in Sydney, Melbourne and Brisbane.

But it has also sold

In June, we reported that a Centuria single unlisted fund, and BlackRock, sold Chatswood’s Zenith Centre twin-tower office complex in for $438.2 million.

The consortium paid Dexus and GPT $279.1
million for this investment in 2016, before repositioning it.

Centuria banked a $15.7 million
performance fee following this disposal.

Another fund sold a half share of 8 Central Avenue, in Sydney’s Australian Technology Park – banking $191 million (this deal delivered an IRR of 25 per cent. Centuria’s performance fee was $9.2 million).

Keeping tenants on side a key: CNI

Mr Huljich said CNI maintained value for its 2-10 Wentworth Street unitholders by keeping close relationships with tenants and actively responding to their needs.

“Quality tenants underpin the strong, reliable income
streams that investors have come to expect from our unlisted funds, which is
why we are so focused on maintaining and improving our properties to ensure
excellent leasing outcomes.

“We have a history of excellent through-cycle performance,”
the executive added. “Similar to 2-10 Wentworth Street, Parramatta, our
recently completed Centuria 8 Central Avenue 1 Fund and Centuria Zenith Fund
delivered attractive IRRs of 20 per cent and 23 per cent respectively”.

“Additionally, at least five of our funds have been
included in the top ten funds in an IPD/MSCI index each quarter for the past 11
quarters, which we believe is a strong endorsement of the quality of our funds
and our active management approach”.

Mr Huljich said CNI will now look for more assets in
which it can add value and produce income and capital growth return.

The Parramatta office at 2-10 Wentworth Street achieves an average rent of $617 per square metre, per annum. When CNI picked up the asset, it was earning a comparable $497 psm/pa.

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