Weekly Transaction Update - 1st September
This week we recorded 9 major deals for a total value of $608M.
The largest deal was sale by Anton Capital of 120 Spencer Street Melbourne for $250M on a yield of circa 4.6%. The purchaser was CBRE Global Investors. Anton Capital acquired the fully refurbished 33,000sqm asset in April 2016 for only $165.2M on a fully let yield of 7%. The property was 90% leased predominantly to government and education sector tenants. Assuming Anton geared the asset to a 40% the IRR on their investment would have been close to 40% given the short holding period.
Also announced this week was the acquisition by GDI of Westralia Square, 141 St Georges Terrace, Perth. This was the last of the assets disposed by the Western Australia Insurance Commission and was transacted at $216.25M representing $6,626/sqm of NLA. Of the 32,635 square metres of lettable, approx 2,300 square metres is vacant (circa 7%). As was typical of Perth assets the rents struck over the last 5 years were highly inflated due to the mining boom, however as rents have come down, the passing yields are very high. The average net rent for the building is currently at $751/sqm providing a passing yield of 11.3%. These rents will unwind over the next few years as the building has a 2.5 year WALE. Assuming the market rent for these assets is closer to $500/sqm, the indicative market yield is closer to 7.55%. This is a good counter cyclical move for GDI who will attract strong retail capital inflows attracted to a high initial yield. The test will be whether GDI can secure new leases at or above $500/sqm and resell the building for a cap rate sharper than 7.5%. I think there is a good chance of both.
There were a number of other deals this week. Scroll through the list below or head to Propel for further details.
* indicates unconfirmed price