The Zenith benefits from hands-on approach
The success Centuria has achieved with The Zenith highlights our strategy of identifying opportunities in strengthening markets where hands-on active management can make a difference, says Stuart Wilton.
Based in Sydney’s Chatswood, The Zenith is one of the city’s most in-demand metro office properties. We bought this A-Grade asset in July 2016 through our unlisted funds business for $279 million as a 50-50 joint venture with a private real estate fund managed by BlackRock. Since then, and following significant leasing success, we placed it on the market in late February via an expressions-of-interest campaign that closed on 4 April 2019.
Our leasing success and the significant increases in value we achieve for properties such as The Zenith stem from our practice of identifying opportunities where we can make a difference. For example, to improve rents or grow capital value we seek out properties where we can make improvements to the asset or capitalise on infrastructure upgrades, such as the Sydney Metro. There may also be various demographic factors that enable us to add value to a building as well.
The Zenith comprises two high-quality towers and sits in our Centuria Zenith Fund. In the two-and-a-half years since its purchase, we have leased approximately 41,000 square metres – out of a total of 44,100 square metres – which corresponds to 57 deals. Occupancy when we first bought the building was 95% but at the end of December 2018, it was 100% – a clear demonstration of our leasing success.
The highest rent achieved at the property of $685 per square metre net is 40% above the average net market rent at purchase while the weighted average lease expiry (WALE) as at the end of December 2018 was approximately 4.5 years, an increase on the 2.5 years it was in July 2016.
We were attracted to this building for several reasons including its proximity to public transport, such as buses and the Sydney Metro, and to the amenities offered through the number of nearby shopping centres and restaurants. The building itself has green spaces and gardens, a café and healthcare centre and new end-of-trip facilities, such as showers, lockers and bike spaces.
Another reason for our interest in The Zenith was that we felt the increasing costs associated with leasing CBD locations would be a deterrent for some organisations, which would look instead to suburban areas in which to relocate.
Our strategy of choosing buildings where we can make improvements was realised with this purchase as we quickly implemented an extensive capital works program and capitalised on the opportunities in the local market around Chatswood. Since its purchase, we have installed state-of-the-art end-of-trip facilities, refreshed the lobby along with 10 floors of bathrooms and there is also a full lift upgrade being carried out. We also constructed a number of speculative fit-outs that have proven to be successful.
Centuria prides itself on its active management approach, which we find leads to attracting and retaining high quality tenants. This approach is evident in the refurbishment and leasing achievements accomplished at The Zenith. The success of this building is testament to our experience and capabilities, as well as to the current strength of Sydney’s metropolitan markets.
This article was issued by Centuria Property Funds Limited (Centuria) (ABN 11 086 553 639, AFSL 231 149), a wholly owned subsidiary of Centuria Capital Group (ASX: CNI), as Responsible Entity for the Centuria Zenith Fund (ARSN 612 163 416). The information in this article is general information only and does not take into account the financial circumstances, needs or objectives of any person. Centuria is the responsible entity of a number of listed and unlisted property funds, each of which are issued under a product disclosure statement (PDS) that is available on Centuria’s website centuria.com.au for all funds open for investment. An investment in any of Centuria’s property funds carries risks associated with an investment in direct property including the loss of income and capital invested. The risks relating to an investment are detailed in each Fund’s PDS and Centuria strongly recommends that the PDS be downloaded and read before any investment decision is made. Centuria receives fees from investments in its property funds. Past performance is not a reliable indicator of future performance.