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Weekly Transaction Update - 31st May


This week we recorded 20 major transactions worth $2.4bn

Charter Hall on Acquisition & Fees Hunt

Charter Hall are ramping up their acquisition activities as the group continues to aggregate property across their range of funds prompting JPMorgan analysts to upgrade the property fund manager’s projected haul of performance fees over the next five years.

Charter Hall has been in talks with GIC to acquire a $900M half-stake in the leasehold of the Chifley Tower and Plaza reflecting a yield of under 4.5 per cent. The leasehold runs out in June 2113, however CHarter Hall's Prime Office Fund acquired the freehold interest in December 2018 for $98M.

GIC had attempted to sell the tower last year, however many large institutions were not prepared to deal with a leasehold interest, placing Charter Hall in the box seat for the acquisition.

Charter Hall & GIC has also been linked to a half stake in Telstra’s Melbourne headquarters at 242 Exhibition St as Oxford Properties Group weighs up selling its interest in the $800m complex.

In Brisbane, Charter Hall are backing a plan by the Morris Property Group’s to attract the ATO to its $250M 152 Wharf Street project. The ATO have been in the market for 20,000sq m. The Morris Property Group have proposed a 27-storey commercial tower after dropping an earlier plan for a 197-unit tower on the site.The new commercial scheme features 24,416sq m ​​with ground floor retail and 20 levels of A-grade office space.

On the industrial front, Charter Hall are also buying a 6.18ha site in Eagle Farm that has a 19-year lease to Brisbane City Council. The site in Schneider Road is a bus depot and spins off a net income of $5.2m and has rent reviews of 2.5 per cent.The triple net lease property, being traded via CBRE, could be bought for about $105m.

Charter Halls assets under management are expected to swell to as much as $52 billion over the next five years, a revision upwards from $48 billion. According to JP Morgan, the listed manager could invest as much as $680 million of its own equity into its funds, up from $480 million, and book $265 million in performance fees, up from $245 million, according to JPMorgan.

GPT Pick up More Logistics

GPT have ramped up their efforts to diversify their balance sheet with the acquisition of $212M of industrial assets in recent weeks.

The recent purchases include a series of 3 industrial assets being sold by AMP Capital at Kingsgrove, Villawood and Blacktown. The sale price of $105M provides GPT a blended yield of 5.6% across 50,000sqm of NLA.

GPT also acquired 2 industrial buildings for $107M in Erskine Park which include a 25,400 sq m and a 12,300 sq m warehouse, both built in 2009, and which are next to GPT’s 24-hectare Connect@Erskine Park logistics precinct.

Challenger Sells Another Brisbane Asset

Challenger continues to offload direct assets with the sale this week of 30 Makerston Street Brisbane to Sentinel Property Group for $103m.

The 14 level office building spans 14,640sq m and it is fully leased with a 4.63 year weighted average lease expiry. The sale price represents a passing yield of 7.85% and a capital value of $7,036/sqm.

Challenger held the asset in its books based on the June 2018 valuation of just $70.7M.

Challenger have now sold off over $1.2bn of real estate across 11 assets since 2015, with another $100m on the market, but also invested a similar amount in higher quality assets.

The latest sale brings to 4 assets disposed in Brisbane including 72 Queen St, 61 Pietrie Terrace, 52 Albert St and now 30 Makerston. In Melbourne sales included 31 Queen St, 500 Chapen St South and an industrial asset in Laverton whilst in Sydney, Challenger have sold assets in St Leonards. Currently on the market are interests in Vicinity's Corio Central and Lennox Village Centres.

Challenger are trading up by selling older style metropolitan or fringe assets in favour of CBD assets or long WALE leases, with the exception of the North Rocks Shopping Centre which has since undergone a minor expansion.

Sentinel has now amassed a portfolio of properties in Brisbane, Darwin, Townsville, Cairns, Newcastle and the north coast NSW regional centre of Port Macquarie worth more than $350m, with the latest acquisition it's largest.

The transaction was brokered by JLL.

Westpac Call Centre Sale

A large Westpac call centre at Concord West has been sold recently by a company associated with AMP Capital in an off market deal for $104M. The 3.2ha site sits alongside the Concord West railway station and was acquired by the vendor in 2012 for $52M. The new purchaser of the site is a private company, Concord West (Property) Pty Ltd.

The Westpac facility comprises a 16,580sqm single level call centre purpose built for Westpac in 1987. The site includes parking for 480 cars, a gym, basketball court and child care centre.

According to the Knight Frank's sale assessment in 2013, the lease to Westpac was due to expire in 2022. Assuming the lease conditions remained the same, the passing yield on the recent transaction would be circa 5.0%.

The North Strathfield to Rhodes corridor has seen an increase in activity over the past 12 months, buoyed by the improving infrastructure in the region.

The Yuhu acquisition of the BakeHouse Quarter (which settled in April 2019) for $380M set an unprecedented value for a 6ha site in the metropolitan area at $6,283/sqm of land area. The Bakehouse Quarter has a number of tenants including Fitness First, Arnotts, IGA, WOTSO Workspace, AMF Bowling and Pancakes on the Rocks. Along with these major tenancies there approximately 68 further tenancies. The sale price reflected a yield of just 3.5% on the passing income, however a premium appears to have been paid for further development potential of the site. The site contains items of heritage value so further development will mostly be constrained to undeveloped part of the site.

Further north at Rhodes, computing giant Hewlett Packard brought in well-established Sydney developer Billbergia in a joint venture arrangement to transform its Rhodes site into a $1 billion mixed use development by sharing the uplift in the value of the 3.4ha site when rezoned. The land alone was reportedly worth as much $150 million. Billbergia are deeply entrenched in the Rhodes development scene with projects at Rhodes Central and across the bay at Wentworth Point.

Interest in the region has increased following the State Governments decision to locate a Metro Rail interchange station at either North Strathfield or Concord West. A final decision has not been announced however indications suggest it is more likely to be a North Strathfield. The two stations are just 1km apart so any Metro Rail interchange will clearly benefit the region which will provide a more direct link to the CBD and Parramatta and then likely further west to the Western Sydney Airport.

Any parties making further enquiries in relation to the transaction, may wish to contact us.

Centuria Acquires 10 Moore St Canberra

The unlisted Centuria Diversified Property Fund has made its second acquisition, snapping up a Moore Street office building in Canberra for $35 million from Quintessential.

10 Moore Street is a six-level commercial office building with 6,709sqm and 42 car parking spaces.

Quintessential acquired the asset in 2014 from AMP Capital for $18M, providing Quintessential an 11.5% initial yield. At the time the asset had an 8% vacancy factor and an opportunity to refurbish and remix the tenant base in the building. Quintessential were familiar with the Canberra market having previously acquired 14 Moore Street and Penrhyn House at a time when other investors were negative on Canberra.

Quintessential completed the refurbishment with upgrades to lifts, lobbies and bathrooms, a fresh exterior paint, and a full regeneration of its base building plant and equipment to increase its NABERS Base building Energy rating to 5.0-stars.

The property is now 100% leased with a net passing income $2,393,177 underpinned by 14 tenancies providing a diversified tenancy a 4.5yr average lease expiry. The sale price represents provides a 6.65% yield to Centuria.

Quintessential sold its 14 Moore Street property in March 2019 to Marprop on a 7.1% yield whilst the nearby 16 Mort Street building was sold by Oxford to Charter Hall Long Wale REIT for $105m on a 5.8% yield.

The 10 Moore St transaction was brokered by JLL and Colliers.

Goodman in $70m Logos deal

Logos have acquired another site from Goodman at Truganina in Melbourne's west for $70M on an initial yield around 5.25%.

The 8.5ha site, in the Connectwest Industrial Estate on Logistics Drive, will be developed by Goodman as a 48,770sqm distribution centre for furniture retailer, AMart.

Goodman had earlier announced its 10 year lease deal with AMart suggesting that the end value of the asset was circa $65M.

The deal is expected to complete in early 2020.

According to Logo's, their Melbourne portfolio now stood at about 350,000sqm with an additional 27ha of development land at its Truganina Logistics Estate.

Arch Capital pick up 95% of North Syd asset

Hong Kong's Arch Capital, is set to take control of 68 Alfred Street North Sydney, following the collective sale of 95 per cent of the strata office block for about $45 million.

In November 2018, Colliers took to market 64% of the unit entitlements, however as this was insufficient to take advantage of the recent reform to NSW strata laws, a sale was delayed.

Arch Capital ultimately struck an initial agreement with owners holding 75 per cent of unit entitlements in the block and then secured a further 20 percent with now just 5% of owners preferring to hold out.

The B-grade 4402 square metre building at 68 Alfred Street was strata-titled in 1997. It has 11 levels of offices, retail space on the ground floor and 28 basement car parks. It is returning a net annual rent income of more than $2 million.

Arch Capital is understood to be planning a substantial upgrade of the building.

Review our other transaction data at ReSourceData.

* indicates unconfirmed price or apportionment of a portfolio sale

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