Centuria sale announced as AFR real estate deal of the year

Centuria’s sale of landmark Sydney CBD building, Swire House, has been recognised as the deal of the year in the Australian Financial Review’s article, Best and worst real estate deals of 2017.

Centuria purchased the B-Grade office property at 10 Spring Street, Sydney in 2013 for $91.64 million and sold it in October 2017 for $270.05 million. This record breaking price means Centuria’s investors’ equity investment tripled over the four years in addition to their income return of 8% per annum.

The final sale price is an outstanding outcome for investors, reflecting a passing yield of 3.91% and a capital value rate per square metre of $19,477.

The property was sold to Lendlease, which owns the adjacent buildings to Swire House and is now able to amalgamate its properties on Spring Street to create a super development site.

Speaking about the sale of the property, Jason Huljich, CEO Unlisted Property Funds for Centuria, said he was unsurprised by the strong level of buyer interest.

“High quality properties in such an excellent location don’t often come onto the market, and 10 Spring Street has the advantage of appealing to a range of buyers,” said Mr Huljich.

“We believed it would be attractive for purchasers looking to buy and hold the property, with a strong passing net income and the upside of fixed annual rental increases of around 4%. In addition, the weighted average lease expiry (WALE) is relatively short at around three years, offering the chance to capitalise on the strong demand for B-grade office space in the Sydney CBD when leases come up for renewal,” Mr Huljich said.

While the building was 20% vacant at the time of acquisition, Centuria was attracted to the property because of its prime location. It is now on a Strategic Site as identified in the City of Sydney Draft Planning Strategy 2016, providing the potential to construct a tower of up to 290 metres in height.

In addition, Centuria’s active management of the property, including a program of upgrades and investment, has seen record B-grade rents achieved of up to $1,200 psqm and the building becoming fully leased.

In conclusion, Mr Huljich said that Centuria was very pleased with sale price of 10 Spring Street, and explained that the decision to sell was made in line with the Group’s overarching strategy.

“10 Spring Street has been a spectacular performer for our investors since we purchased it in 2013, but the time is right for us to sell and to redirect the funds to other investment opportunities where we believe we can add more value in the future,” Mr Huljich said.

The sale was handled by Josh Cullen and Rick Butler of INC RE and Simon Fenn, Graeme Russell and Ben Azar of Savills.