Metro office markets’ strength revealed as Centuria and BlackRock make significant profit for investors on Zenith towers

11 June 2019

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.