Centuria oversubscribed fund raises 150m

8 March 2017

Publication: Australian Property Journal
Author: Liz Jordan
Date: 8 March 2017

Centuria oversubscribed fund raises 150m

INVESTORS searching for superior returns have flocked to Centuria Capital’s Scarborough House Fund, which has closed oversubscribed following demand for $150 million of equity for the $46 million offer.
The offer was closed to new investors after five days.
The unlisted fund is a single-asset trust that owns Scarborough House, which is purchased for $72.3 million, in Canberra’s major health precinct of Woden.
The 16,782sqm building underwent a major overhaul in 2005, and is fully leased with 98% of its area occupied by the Commonwealth Department of Health until July 2025.
The property is located 1.5 kilometres from Canberra hospital, and ACT Health leased the neighbouring site for 15 years.
Centuria chief executive officer, unlisted property funds, Jason Huljich, said low interest rates and an uncertain economic climate is making unlisted property funds a very appealing proposition for yield-starved investors.
The initial distribution yield for the fund is 7% per annum for the 2017 financial year, forecast to increase to 7.25% in 2018, which Huljich said compares very favourably to other investments with the same low-risk profile.
“Scarborough House also has the highest quality of tenant – the Commonwealth Government – and the weighted average lease expiry (WALE) is long, nearly eight and a half years,” he said.
Huljich said the gearing in the trust is low, at just under 40%.
“The low risk profile and stable yield of the Fund mean that investors may well be comparing it to a fixed interest investment. But with 10-year Treasury bonds returning under 3%, Scarborough House looks like a very good alternative,” he said.
Huljich said Centuria is now actively seeking other property assets with a similar profile, suitable for an unlisted trust of this nature.
“The profile of this kind of office asset is clearly very appealing in the current economic climate. But of course, the challenge is to identify the right asset at the right price and in the right location.
“Our focus at the moment is the Sydney and Melbourne markets, because we believe they have the strongest fundamentals, but we have always been opportunistic buyers, and are currently looking at opportunities in all markets,” he concluded.

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