20 May 2016

Centuria announces major new unlisted property investment

Investors given opportunity to invest in iconic commercial asset on Sydney’s North Shore

Centuria Property Funds Limited (Centuria) today announced that contracts have been exchanged on the Zenith, an institutional grade office asset located at 821 Pacific Highway, Chatswood.  A new Centuria unlisted property fund, the Centuria Zenith Fund, will co-invest with global investment firm, BlackRock to acquire the property. The purchase price is $279.1 million. The purchase remains subject to FIRB approval, with settlement expected to occur in late July.

Commenting on the Fund, CEO – Unlisted Property Funds, Jason Huljich, said he was confident the Fund would provide attractive returns to investors due to the strong fundamentals of the location and the property itself.

“Sydney’s North Shore office market is already performing strongly, and we expect that it will continue to experience falling vacancies and strong rental growth over the next few years. The withdrawal of commercial office space in the CBD and North Shore due to residential conversion and the construction of the Metro will drive above trend rental growth and mean excellent total returns for our investor clients.

“Chatswood is a dynamic office, retail and residential area and is the North Shore’s major rail and bus hub. The new Sydney Metro rail infrastructure will further improve connectivity,” he said.

The Zenith is a landmark office asset with a diversified tenant mix. Approximately 40% of its rental income is underpinned by government tenants, and it is currently 94% occupied. It has around 44,000sqm of net lettable area with 800 car spaces and occupies a large 8,000 sqm site.

Mr Huljich said that he was pleased to be able to offer such an iconic asset to the market via an unlisted fund.

“In the current low interest rate environment, there’s no question that investors are becoming increasingly yield-driven. Distribution yields from the Zenith Fund are forecast to be 7.6% in the 2017 financial year, growing to 7.7% in the 2018 financial year. These are very attractive rates for such a high quality asset,” Mr Huljich said.

In conclusion, Mr Huljich said that the choice of The Zenith is in line with Centuria’s investment strategy, which has been primarily focused on Sydney over the past 5 years.

“We are asset-driven in our investment strategy, which means we will consider all properties, even those in weaker markets, if we can see the potential for strong returns over time. But it’s fair to say that our pick at the moment is Sydney. “Our partner, BlackRock, clearly shares our confidence when it comes to The Zenith, and we anticipate that we will experience the same strong investor demand for this fund as we have done for our previous unlisted investment funds,” Mr Huljich said.