Counter-cyclical investment opportunity underpinned by strong local market tailwinds

  • 50:50 joint venture in A-Grade office asset, Perth CBD location; 7.25% capitalisation rate
  • 5.8 year WALE1, 85% occupancy2 provides opportunity for lease repositioning upside
  • Acquisition underpins single asset wholesale unlisted property funds for both firms.

Centuria Capital Group (ASX:CNI) and MA Financial Group have conditionally secured one of Perth’s well known A-Grade office towers, “Allendale Square,” through a 50:50 joint venture for $223 million on a capitalisation rate of 7.25%.

The acquisition is part of a counter-cyclical investment strategy with the iconic office tower secured with significant embedded capital value and current vacancies and near-term expiries providing an opportunity to generate lease repositioning upside by leveraging Centuria’s in-house active management capabilities.

Centuria will provide property management for the asset while each party will be responsible for the asset management of their respective investment funds.

The 31 storey office building is located within the heart of WA’s capital city at 77 St Georges Terrace, providing 25,908sqm of office accommodation and 2,745sqm of food, beverage and non-discretionary retail space below the tower.

The building’s superior location recently attracted a positive re-rating value due to its proximity to Elizabeth Quay’s substantial regeneration activity, which has benefitted from new food and beverage offerings, The Ritz Carton Hotel opening and new residential towers in recent years. Allendale Square is anticipated to benefit from further domestic and offshore capital committed to the live-work-lifestyle Elizabeth Quay precinct throughout the coming years.

Jason Huljich, Centuria Joint CEO, said “Allendale Square provides a great counter-cyclical investment opportunity being acquired with embedded capital value and within a market that benefits from strong tailwinds. Perth has the country’s highest occupancy rate among all capital cities with a 71% occupancy rate3 and the market is further supported by a strong outlook for tenant demand throughout the medium term.

“Furthermore, the property benefits from its close proximity to Elizabeth Quay, which is Perth’s answer to Sydney’s Barangaroo. Significant redevelopment is being completed within the quayside area in the short to medium term, which extends across the same period as the Fund’s term. This A-Grade office building provides direct access to the new, rejuvenated waterside precinct while being in the heart of Perth’s CBD.”

Julian Biggins, MA Financial Group Joint Chief Executive Officer, said, “The calibre of Allendale Square means it is well positioned to take advantage of the flight-to-quality trend occurring throughout the office market.

“This is particularly relevant in a market like Perth’s CBD where the sub-lease vacancy is at its lowest in a decade. Prime quality investments are set to capture growth as rising costs constrain new supply and upward pressure on economic rents increases.”

Allendale Square benefits from a 5.8 year weighted average lease expiry (WALE)1 and 85% occupancy2, providing an opportunity for the joint venture parties to utilise their capabilities to generate lease repositioning upside.

Throughout recent years, approximately $62 million of refurbishment works have already been invested into the building, which provides a springboard to enhance the property’s position as one of Perth’s premier St Georges Terrace addresses.

Allendale Square is the second JV acquisition between Centuria and MA Financial, having acquired “The Black Stump” at 25 Grenfell Street, Adelaide, in October 2022.

Centuria is one of the country’s few real estate fund managers that also provides inhouse facilities and property management. Being at the coalface of tenant relations enables the business to proactively respond to occupier needs, which is demonstrated by Centuria’s low 5.02%4 vacancy rate across its Perth CBD office portfolio.

This transaction is another example of MA Financial’s continuing expansion in its real estate management offering as well as capitalising on its strong industry relationships to partner on high quality investments. Including this transaction, MA Financial has transacted over $900 million of office, retail and logistics assets over the last two years.

Both parties’ investment in Allendale Square will be part of their respective new unlisted single asset closed-ended wholesale property funds. The funds will provide an initial five-year term and open for investment in September 2022.

Centuria’s Allendale Square Fund has a minimum entry investment of $100,000. Centuria will seek to raise c.$70 million to launch the Fund. Applications for units in ASF must be made pursuant to an Information Memorandum, which is available on Centuria’s website.

MA’s Allendale Square Fund will also seek to raise c.$70 million. Applications for units in the MA Financial fund must be made pursuant to an Information Memorandum, which is available by contacting maclientservices@mafinancial.com.

Cushman & Wakefield’s Josh Cullen and Colliers International’s Adam Woodward facilitated the transaction.

 


1. Weighted Average Lease Expiry (WALE) by income, including Vendor Rental Guarantees, as at 1 December 2022.
2. The property is currently c.90% occupied and is secured with 12, 18 and 24-month gross rental guarantee over the remaining vacant space and retail tenancies.
3. Source: ANZ/ Property Council Office Market Report July results.
4. Centuria’s Perth CBD office portfolio vacancy as at 13 September 2022. Vacancy also reflects signed Heads of Agreement.

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