Centuria launches its largest single asset unlisted fund
Australia’s largest single-asset retail cap raise in 15 years1
- Centuria acquires $224 million Footscray A-Grade office building, 100% occupancy with 11.8 year WALE2
- Australia’s largest single asset unlisted fixed term fund retail capital raise in 15 years1– $133 million equity target
- Forecast FY22 distribution yield of 5.25%3,4 growing to 5.35%4 in FY23
- Strong tenant covenants, c.90% leased to Victorian Government departments and agencies
- Centuria is one of Australasia’s largest unlisted fund managers with c.$10bn AUM – $16bn total AUM7.
Centuria Capital Group (ASX:CNI) has secured a 14 level $224 million office building in Footscray, Victoria, for a new unlisted fixed term, single asset fund, Centuria Government Income Property Fund (CGIPF)4.
CGIPF will seek to raise $133 million, which is Australia’s largest single asset retail capital raise within the past 15 years1.
The A-Grade office building, located at 1 McNab Avenue, Footscray, was secured with 100% occupancy on a 11.8 year Weighted Average Lease Expiry (WALE)2 at a market capitalisation rate of 4.7%.
The 20,191sqm building was constructed in 2014 and includes nine levels of office accommodation, four levels of secure parking and benefits from strong sustainability credentials, including 5.5 Star NABERS energy and water ratings.
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%), State Trustees Limited (31%) and the Victorian Government’s Treasury and Finance Department (27%). 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.
Jason Huljich, Centuria Joint CEO, said, “Centuria has a 22 year track record for delivering successful fixed term unlisted funds. This will be our largest capital raise to date for a single asset unlisted fund with a target of approximately $133 million. In fact, it’s the largest retail equity raise undertaken in Australia for a single asset fixed term unlisted fund within the past 15 years1.
“In this low interest rate environment, there is a strong appetite from retail investors who are searching for investments with compelling yields. We continue to witness this strong appetite with the oversubscription of our recent unlisted fundraisings.
“In FY21 to date, our unlisted division has executed six capital raises across four single and multi-asset fund mandates. Combined, we have raised over c.$184 million to deploy across attractive unlisted real estate opportunities throughout Australasia.
“With rising white collar employment and workforces increasingly returning to the office, we believe office asset investments will increasingly deliver strong results. Already within the past few months, we’ve witnessed several large office transactions in the domestic market.”
The office building is located within the gentrifying, inner city Melbourne suburb of Footscray, approximately 6.5 kilometres from the CBD. This fringe market is benefiting from significant infrastructure investment, the expansion of government services within the area in addition to high residential demand. The area’s population is forecast to almost double by 20416.
The Victorian Government has identified Footscray for a 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).
Following the merger with Primewest becoming unconditional, Centuria will be one of the largest unlisted property fund managers in Australasia with c.$10 billion of AUM across its unlisted platform and more than $16 billion of AUM across the Group platform7.
CGIPF’s capital raise is expected to open from Thursday 1 July 2021 and anticipated to close 28 July 2021.
Knight Frank’s Paul Kempton was the appointed agent on the 1 McNab Avenue sale.
1 As verified by Core Property Fund Research & Ratings.
2 As at 1 August 2021
3 Annualised distribution yield for the period 1 September 2021 to 30 June 2022
4 Forecast returns are predictive in nature and are calculated in accordance with a number of underlying assumptions set out in the Product Disclosure Statement (expected to be issued on or around 1 July 2021). 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
5 Subject to assumptions and risks set out in CGIPF’s Product Disclosure Statement (PDS) (expected to be issued on or around 1 July 2021) and over the initial five-year term.
6 Source: Knight Frank Research, ABS, Department of Environment, Land, Water and Planning
7 Pro forma AUM as at 31 December 2020 adjusted for post balance date revaluations and acquisitions. Prepared on the basis of 100% acquisition of Primewest Securities by Centuria. Includes the 50% acquisition of Bass Capital as well as 140 St Georges Terrace, and Centuria Industrial REIT (ASX:CIP) revaluations.