$36 million Epping sale driven by hunger for suburban offices

20 June 2018

Investor appetite for suburban metro properties demonstrated by high yield

Centuria Metropolitan REIT (CMA) today announced the sale of 3 Carlingford Road, Epping, for $36 million to a private buyer. The sale price represented a 118% increase on the purchase price of $16.5 million in December 2014.

The fully-leased office building sold with a tight passing yield of 5.4%, demonstrating the strength of suburban markets. The property gained a 27.2% premium between its last independent valuation in November 2017 and the sale.

CMA Trust Manager Nicholas Blake explained “With more than a dozen bidders competing for the asset, we are clearly continuing to see a strong demand for metropolitan property – and in particular for high quality properties with development potential.

“We usually look for and manage properties with an eye to leaving their purpose and use open-ended. Such flexibility is the best strategy to future-proof assets for investors, as well as addressing the need for high quality suburban stock.”

It’s clear that investors have sustaining appetite for such stock, against a limited supply of the same.

The sale campaign was run by Guillaume Volz and Henry Burke of Colliers International, and Tim Grosmann and Graeme Russell from Savills.

Grosmann, Director, Capital Transactions at Savills, said “The excellent result on Epping is a direct result of prime property fundamentals; a corner block, close proximity to a train station and strong rental reversion in a market that is starved of commercial suburban stock.”

Guillame Volz, National Director, Development Sites – Residential for Colliers, affirmed that “The sale demonstrates that strong buyer interest still exists from both local and offshore buyers for well-located suburban properties, with passing income and good development potential.”

Blake went on to say that “Applying a forward-looking lens is key to our acquisition strategy, and it pays dividends when done well. On this occasion, we have been able to realise a premium on the asset, and achieve a tight passing yield of 5.4% which compares positively against typical yields we see in key NSW metro markets of around 6% to 7%.”

For investors in this REIT, the success is testament to the importance of fund managers with deep market knowledge and the skill of identifying good opportunities with the potential for capital gain, and of actively managing assets to capitalise for significant upside. With this arsenal, CMA continues to deliver value to its investors with significant return on investment.

Contracts have been exchanged and settlement is expected in September 2018. The proceeds will be used to unlock select, accretive acquisition targets and further capital management initiatives.