Australia’s largest1 single-asset retail capital fundraise completes
Centuria raised $133 million for unlisted fund
- $133 million raised in three weeks, closing early due to overwhelming demand
- Funds secured for single asset unlisted fixed term fund, five year term
- Forecast FY22 distribution yield of 5.25%2,3
- Underpinned by $224 million Footscray A-Grade office building, 100% occupancy with 11.8 year WALE4
- Significant demand from mum and dad investors.
Within three short weeks, Centuria Capital Group (ASX:CNI) has raised $133 million for its unlisted, fixed-term Centuria Government Income Property Fund (CGIPF), cementing it as Australia’s largest retail single-asset capital fundraise within the past 15 years1.
Centuria closed the fundraising offer seven days early due to significant demand for the fund, reflecting strong appetite from mum and dad investors seeking high yielding investments in this low interest rate environment.
Jason Huljich, Centuria Joint CEO said, “We are very pleased with the strong response to CGIPF and appetite for this five year fixed term fund. We knew this was an ambitious undertaking with it being our largest retail fundraise in our 24 year history as well as being Australia’s largest single asset retail fundraise within the past 15 years. It’s worth noting records don’t go back further than 15 years.
“The fundraise has been a strong demonstration of the appetite from mum and dad investors for high-quality real estate assets that can deliver a resilient revenue stream, underpinned by strong tenant covenants. More than 90% of the property’s rental income is derived from government tenants who collectively provide an 11.8 year Weighted Average Lease Expiry4 (WALE). This means the tenancies are secured for longer than the fund duration, providing peace of mind with regard to stable rental revenue.
“The response of this capital raise is a further demonstration in the long-term confidence of high quality office assets. We believe decentralised, fringe and suburban offices have been better performing assets than their CBD counterparts because they provide excellent worker commutability, are often modern and require limited capital expenditure, and offer affordable rents, which improves the likelihood of high rental collection and, therefore, fund income.”
CGIPF’s single asset is a 14 level $224 million office building in Footscray, Victoria. The A-Grade office building, located at 1 McNab Avenue, Footscray, was secured with 100% occupancy at a market capitalisation rate of 4.7%.
The asset is underpinned by strong tenant covenants with 91% of the building leased to Victorian Government departments and agencies including City West Water (32.5%), State Trustees Limited (31.1%) and the Victorian Government’s Treasury and Finance Department (27.5%). The remainder of the office accommodation is leased to quality professional services.
CGIPF forecasts a starting distribution yield of 5.25%3,4 in FY22 and the fund has an initial five-year term5.
The Victorian Government has identified Footscray for its new government work precinct. It is creating five government work hubs for Victorian Public Service (VPS) in metropolitan Melbourne areas to allow workers to be in close proximity to their homes. The hubs will accommodate up to 2,380 public servants each week. 1 McNab Avenue will be the first government work hub in operation.
The Footscray asset is well positioned with excellent public transport connectivity with rail and bus interchanges within 200m of the building. It is also a short distance from the Docklands Highway (east) and Princes Highway (west).
1. Source: Core Property Fund Research & Ratings
2. Annualised distribution yield for the period 1 September 2021 to 30 June 2022
3. Forecast returns are predictive in nature and are calculated in accordance with a number of underlying assumptions set out in the Product Disclosure Statement. As such, returns may be affected by incorrect assumptions or by known or unknown risks and uncertainties and may differ materially from results ultimately achieved. Returns are not guaranteed.
4. As at 1 August 2021
5. Subject to assumptions and risks set out in CGIPF’s Product Disclosure Statement (PDS) and over the initial five year term.