• Centuria has sold an A-grade office building in Brisbane’s inner-city suburb of Cannon Hill for $36.95m
  • The expressions of interest campaign generated strong demand, resulting in 9 offers
  • A total return of 109% was generated for Centuria investors.

Centuria Property Funds Limited (Centuria) has sold 19 Corporate Drive in Cannon Hill, an A-grade office building in Brisbane’s inner city, for $36.95 million following a campaign that generated strong buyer interest.

Completed in 2008, the two-level commercial building comprises 6,028 sqm of A-grade office accommodation strategically positioned six kilometres from the Brisbane CBD in the tightly-held Southgate Corporate Park.

Head of Real Estate and Funds Management, Jason Huljich commented “The property was originally purchased in December 2012 for $23.30 million and the Fund’s investment rationale since commencement was to provide investors with stable, high yielding and diversified income returns from a quality commercial office property situated in one of Brisbane’s most prominent growth corridors.

“The Fund has yielded an average income return to investors of approximately 10.3% p.a. over the six and a half years. This is an excellent result for all investors in the fund.”

The sale was negotiated by Matt Barker, Justin Bond and Christian Sandstrom of Knight Frank, along with Anthony Ott and Peter Chapple of Savills.

Sydney-based syndicator Aviator Capital was the successful buyer. It was Aviator’s third acquisition within the Brisbane market.

Centuria and BlackRock’s Zenith office towers in Chatswood

  • Centuria and BlackRock sell The Zenith for $438.2 million
  • Over 40,000 sqm leased during ownership period (58 deals)
  • WALE extended by 80%

Centuria Property Funds Limited (Centuria) and a private fund managed by global investment manager BlackRock today announced the sale of their jointly-owned Zenith office towers in Chatswood.

Whilst it was originally intended that the property be held over a longer period, buyer interest in the property resulted in an acceleration of the exit. Demand was extremely strong, with ten offers received for the asset, and according to Centuria’s Head of Real Estate and Funds Management, Jason Huljich, the sale price is an outstanding result, reflecting the general strength of the market and Centuria and BlackRock’s asset management strategy in enhancing the yield on the property

Centuria’s 50% share of The Zenith is owned by investors in the single-asset, unlisted Centuria Zenith Fund, which will be wound up and proceeds distributed to investors, after the sale settles. BlackRock’s interest was held in a private real estate fund that it manages on behalf of its investors.

“Income returns from the Centuria Zenith Fund have been excellent, on average 7.7% p.a., which is very attractive in the current low interest rate environment.”

“The strong sale price achieved from The Zenith offers more proof of our ability to identify opportunities in strengthening markets, which allow us to implement our active asset management strategy to make our properties more attractive workplaces for both our existing and prospective tenants.” Mr Huljich said.

Repositioned for rental growth

Mr Huljich went on to outline Centuria and BlackRock’s strategy to increase the rental returns and consequently the value of the property – starting with a major refurbishment program aimed at transforming the metro office tower into a premier workplace destination, unrivalled in Chatswood and Sydney’s North Shore.

Mr Huljich explained that tenant requirements have been evolving over the past 10 years, and that modern end-of-trip facilities are now seen as essential in any quality property, whether it is in the CBD or the suburban markets and certainly assists in creating stronger tenant demand.

“In the time we have owned The Zenith with BlackRock, our asset management teams have worked extremely hard on the property – they have closed 58 leasing deals to take the occupancy to 100% and increase the WALE from 2.5 to 4.3 years.”

“The success of our active management strategy is clear in the significantly increased rents. When we bought The Zenith in 2016, market rents were on average $490 per sqm net pa and we have recently completed a deal at $685 per sqm net pa, which is the highest rate ever recorded in Chatswood. This is because tenants recognise the quality of the property and its position as the premier building in its market.”

About the property

The Zenith is an iconic A-Grade office complex comprising twin 21 level towers and basement parking. The Centuria Zenith Fund holds a 50% interest in the Property, co-investing with a private real estate fund managed by leading global fund manager BlackRock.

The property is located in the heart of Sydney’s North Shore office market in close proximity to Chatswood Station, at 821 Pacific Highway approximately 12 kms North of Sydney CBD. It has a net lettable area of 44,102 sqm, with 785 parking spaces, on a 7,990 sqm site.

Centuria Capital Group (Centuria) today announced the acquisition of 10 Moore Street, Canberra. The property known as the ‘Optus Centre’ will be directly purchased by Centuria Diversified Property Fund (CDPF) for $35 million from commercial property group Quintessential after contracts were exchanged last week.

Commenting on the acquisition, Centuria’s Head of Real Estate and Funds Management, Jason Huljich, said “Strong support from investors and financial advisers in the CDPF has seen the fund’s inflows increase significantly this financial year, allowing the fund to make strategic purchases. 10 Moore Street is a centrally-located property – ideally positioned in Civic, the heart of Canberra’s CBD precinct. Public transport to the area is excellent and Stage 1 of the light rail, currently under construction, will improve links further with a terminus only 100 metres from the building.”

“Canberra is Australia’s second fastest-growing city (after Melbourne) and this – combined with 10 Moore Street’s central location – was a key factor in our decision to buy. And we believe Moore Street will also quickly benefit from significant public and private investments nearby. The building has been fully regenerated to a very high standard by Quintessential Equity – all the work done over the years has been of a high quality, and the actions undertaken to improve the environmental footprint of the building has resulted in a 5-star NABERS energy rating, further enhancing the quality of this acquisition.”

10 Moore Street’s metrics are also solid. It has a 4.3 year WALE (as at 1 June 2019), and is currently 98% leased to a mix of high-quality tenants, with a 12-month rental guarantee on approximately 2% (123 sqm) of vacant space, which Mr Huljich is confident about leasing.

“One of Centuria’s A-REITs, the Centuria Metropolitan REIT (CMA), owns two properties nearby – at 54 and 60 Marcus Clarke Street, about 100 metres from 10 Moore Street – so we are familiar with the area, and have had very good leasing success there: we understand what appeals to tenants,” he said.

Russell Bullen, Quintessential Equity’s Chief Executive Officer, said the group is very pleased with the sale of the 6,709sqm building, which he calls a “top-tier office investment”.

“Since we acquired the building in 2014, we’ve completed a full regeneration and successful re-leasing campaign at the property, future-proofing it for years to come. There are diverse, high-quality, long-term tenants, strong environmental credentials and an ideal location in an area that will benefit from further investment and significant infrastructure projects.”

Mr Bullen said Quintessential Equity is committed to delivering quality projects that provide secure, long-term cash flow and risk-mitigated returns to investors. Quintessential Equity has a solid property investment track record in the nation’s capital, experiencing success in the past, delivering consistent high returns to its investors.

Growth in the CDPF, particularly via direct acquisitions of quality property, is a key part of the fund’s strategy and this acquisition – combined with the recent purchase of an office property in Hamilton, Queensland – will see CDPF’s assets under management (AUM) increase to over $100 million. Mr Huljich explains “CDPF is likely to continue to invest in Centuria’s unlisted property trusts, due to their high quality income streams, however, we also intend to make more direct acquisitions, because it gives us more control over the geographical diversity of the trust, and the ability to tilt our portfolio to where we see the most potential.”

“It also means direct property exposure for our investors – with the added benefit that directly-held property improves liquidity and we believe this to be in the best interests of our investors.”

Mr Huljich concluded by saying that he is always on the lookout for quality properties to add to CDPF’s portfolio, and that while he considers commercial offices the most appealing sector at present, he is not ruling out other sectors.

“We are asset-specific buyers, so we are happy to consider all markets if we believe we can identify value – and our asset management team are experts when it comes to leasing, managing, and improving our property assets with the aim of achieving strong returns for our investors.”

About the property

10 Moore Street is a 6-level office building with 6,709 sqm of net lettable area on a 1,554 sqm site, fronting Moore and Rudd Street in Canberra’s Civic precinct. Its current 14 tenants are a diverse group of high-quality occupants, some of which have been in the building for over 25 years. The building has recently been refurbished, not only to become one of the few Civic buildings with a 5.0-star NABERS energy rating, but also to provide modern end-of-trip facilities (including showers, lockers and bike storage) and upgraded lobbies, lifts, bathrooms, and exterior.

Disclaimer
The information in this media release is general information only and does not take into account the financial circumstances, needs or objectives of any person. CPFL 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 CPFL’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 CPFL strongly recommends that the PDS be downloaded and read before any investment decision is made. CPFL receives fees from investments in its property funds. Past performance is not a reliable indicator of future performance. CA-CPFL-21/05/19 -00983

A Specialist Healthcare Funds Management Vehicle

Centuria has entered the strongly performing healthcare real estate sector with its wholly-owned subsidiary, Centuria Platform Investments Pty Ltd, acquiring a 63.06% economic interest in Heathley Limited’s (Heathley) property funds management platform for $24.4 million.

The transaction has been funded from Centuria Capital Group’s balance sheet.  On completion of the transaction, the resulting Centuria Heathley vehicle will be jointly owned by Centuria and interests associated with Heathley management.

Transaction Overview

Heathley is a specialised healthcare property fund manager with a $620 million AUM platform of unlisted funds with nationally diversified assets and a strategic focus on the healthcare chain, including medical centres, day hospitals and tertiary aged care.

Centuria Heathley increases CNI’s unlisted real estate AUM by $0.6 billion, taking Group AUM to $6.2 billion1. The transaction introduces a new asset class to Centuria’s expanding real estate platform and fully aligns it to the healthcare property sector though a preferred, specialised manager.

The Healthcare Funds Management Landscape

The Australian real estate healthcare sector is highly fragmented with a limited number of securitisation and institutional real estate managers servicing the asset class.

Centuria Heathley has capacity to expand to circa $1.0 billion AUM in the near term with known potential projects as well as the ability to expand its asset footprint and unlock new retail and wholesale mandates within the sector.

Healthcare real estate has tended to produce higher total returns compared to traditional real estate sectors and is underpinned by fundamentals from Australia’s growing and ageing population, longer life expectancy, increased requirements for ongoing healthcare and continued focus from the Federal Government on preventative care. Healthcare expenditure accounted for $170 billion2 growing 4.7%2 over the 10 years to 2015-16 and is one of the largest contributors to Australia’s GDP at 10.3%2.

John McBain, Centuria Group CEO, said: “The formation of Centuria Heathley marks another important step in Centuria’s growth path. Centuria Heathley demonstrates our commitment towards identifying and executing transactions that complement CNI’s existing platform. Centuria Heathley will provide additional opportunities to grow both our assets under management and recurring revenues.”

Andrew Hemming, Heathley Chief Executive Officer, said: “We welcome the establishment of Centuria Heathley and the opportunity to continue utilising our specialised management capability within the healthcare sector while accessing new capital sources and distribution networks as well as Centuria’s experienced real estate team.”

“We are extremely confident that the combination of skills and attributes each partner brings to Centuria Heathley will not only accelerate growth in our traditional vehicles but will allow us to bring our pipeline forward, enabling us to execute on much larger assets and crystalise wholesale mandate discussions we are presently finalising.”

Jason Huljich, Centuria Director and Head of Real Estate and Funds Management, said: “Establishing a large footprint in healthcare with such a well credentialed manager provides exposure to an asset class with sound underlying fundamentals and increasing national demand. Along with office and industrial, Centuria’s core real estate platform is now aligned to three strong performing real estate sectors and will gain further access to new unlisted retail and wholesale mandates.”

Disclaimer

This announcement contains selected summary information and does not purport to be all-inclusive, comprehensive or to contain all of the information that may be relevant, or which a prospective investor may require in evaluations for a possible investment in CNI. It should be read in conjunction with CNI’s periodic and continuous disclosure announcements which are available at www.centuria.com.au.

This announcement is provided for general information purposes only. It should not be relied upon by the recipient in considering the merits of CNI or the acquisition of securities in CNI.

Before making an investment decision, the recipient should consider its own financial situation, objectives and needs, and conduct its own independent investigation and assessment of the contents of this announcement, including obtaining investment, legal, tax, accounting and such other advice as necessary or appropriate.

This announcement may contain forward-looking statements, guidance, forecasts, estimates, prospects, projections or statements in relation to future matters (‘Forward Statements’). No independent third party has reviewed the reasonableness of any such statements or assumptions. No member of CNI represents or warrants that such Forward Statements will be achieved or will prove to be correct or gives any warranty, express or implied, as to the accuracy, completeness, likelihood of achievement or reasonableness of any Forward Statement contained in this announcement.   

CA-CPFL-22/05/19 PM-00984

1 AUM as at 31 December 2018 with pro forma adjustments to reflect Centuria Heathley Transaction

2 Australian Institute of Health and Welfare – Health Expenditure Australia 2015-16. Figures exclude aged care

Purchase of 381 Macarthur Ave for $19.74 million

Centuria Capital Group (Centuria) has today announced the acquisition of 381 Macarthur Avenue, Northshore Hamilton, QLD. The new-build office, purchased by the Centuria Diversified Property Fund (CDPF, the Fund) for $19.74 million, is the Fund’s first direct property acquisition. Settlement is expected by the end of May 2019.

CDPF is an open-ended unlisted property fund with a limited liquidity facility, which offers investors access to a diversified property investment. Its objective is to provide monthly tax- effective income to its investors with the potential for long-term capital growth.

Centuria’s Head of Real Estate and Funds Management, Jason Huljich, said the acquisition was in line with the Fund’s strategy: “We have always intended to acquire direct assets for the Fund, and 381 Macarthur Avenue is a high-quality, well-located asset with financially strong tenants.” said Mr Huljich.

The commercial office building within Brisbane’s BTP Northshore office precinct is a three-level, A-grade office building developed by Alceon Graystone in April 2018. The 2,847 sqm property has a 5.1-year WALE1. It will generate an initial yield of 7.0%.

Strategic location

Northshore is the transformation of 60ha of State-owned industrial port land into a vibrant $5 billion mixed-use destination, and is Queensland’s largest waterfront urban renewal precinct.

BTP Northshore has attracted national and multi-national occupiers seeking high-quality urban accommodation within a near-city, mixed-use precinct. Consequently, high net worth and institutional investors have secured modern, mid-rise suburban, ‘A’ grade commercial office buildings with strong covenants. The next phase of commercial development will feature an additional 16,000 square metres over four office developments, plus plans for an integrated health and medical precinct to be delivered directly across the street from 381 Macarthur Avenue.

“The asset occupies a prominent location in Northshore – a well-known area with many small- to-medium enterprises whose employees prefer to work close to home, while being conveniently located 6km from Brisbane’s CBD, 5km to Brisbane Airport, and 1km to vibrant shopping precincts, cafes and the iconic Eat Street Northshore. This makes it a good fit for Centuria’s active management approach, demonstrated by the fact that Centuria’s Metropolitan REIT (ASX: CMA) owns a nearby property at 483 Kingsford Smith Drive,” said Mr Huljich.

Selling agent Sam Biggins of Colliers said ‘This investment by Centuria is an endorsement of the institutional quality of office assets being delivered in Hamilton BTP and a sign of faith in the rising Brisbane metropolitan office market’.

Brisbane’s appeal

Mr Huljich went on to say that he expected increasing investor demand throughout Southeast Queensland, including Brisbane.

“The Fund’s exposure to QLD follows our view that Brisbane office markets are steadily improving. In the last half we’ve seen yield compression, vacancy rates at five-year-lows, and rising demand for prime office – trends we expect to continue,” he said.2

In conclusion, Mr Huljich said that the deal demonstrated Centuria’s overarching strategy across its direct and listed property divisions.

“We are asset-specific buyers, so we consider all markets where there is opportunity to find value. We rely on our team’s expertise in active asset management to add value to our properties. This means we purchase properties with the aim of unlocking value through our hands-on approach to refurbishment, facility upgrades, and development of spec fit-outs, undertaken by an in-house team of asset managers.

“When it comes to accessibility for advisers and smaller investors, because the Fund is open- ended and offers some liquidity, it sits on a number of platforms and wrap platforms so is easy to access,” said Mr Huljich.


1 As at 1 April 2019. This includes a 12-month rental guarantee on approximately 288 sqm (around 10% by net lettable area) of the property and 35 car bays.
2 Colliers’ ‘CBD Office First Half 2019’ p.12.

Centuria has partnered with Compass Housing and Tetris Capital as part of the Commonwealth Government’s National and Affordable Housing Agreement and the NSW State Government’s Social and Affordable Housing Fund to source, develop and deliver 192 dwellings across four separate properties1 throughout the Hunter and Central Coast regions.

Centuria has agreed to contribute circa $20 million of equity towards the partnership.

Jason Huljich, Centuria Director and Head of Real Estate and Funds Management, said;

“This is a new growth opportunity for Centuria’s real estate division. The projects have an upfront take-out party secured at a pre-agreed take-out price and the new partnership will be the largest provider of social and affordable housing in the Hunter region. We are focused on identifying further opportunities to establish similar models, which can be rolled out across projects in other NSW regions and other states.”

Centuria’s announcement of a $20 million contribution to the newly established Social and Affordable Housing partnership is a deployment of cash proceeds from the recent sale of its stake in Propertylink Group.

John McBain, Group CEO, said; “The Social and Affordable Housing sector is well positioned to benefit from State and Commonwealth Government commitments towards providing affordable living solutions in NSW and other states.

“While Centuria retains a strong focus on its core property funds management and investment bond businesses, our investment in the Social and Affordable Housing sector is an example of a new business initiative with strong underlying fundamentals, good growth opportunities and the potential to be a strong, ongoing revenue contributor.”


1Terms agreed on final two projects, which are subject to final documentation.

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