Australian Unity Office Fund announced that an asset in Macquarie Park has had a $4m uplift in valuation due a lease restructure.
The site at 5 Eden Park Drive, was independently revalued as at 31 August 2020, to $70m up of $4m above the 30 June 2020 book value.
This increase is primarily driven by the recent restructure of a lease to CPSA for 6,408sqm. The restructure included a surrender of Level 1 (2,593 sqm) which was released leased on a direct basis to Saluda Medical with the lease term extended by a further three years to 30 June 2029.
A new lease for the remaining ground floor warehouse and production facilities (~4,436 sqm) has been entered into by Aegros (who has acquired CSPA) with the expiry date maintained at 30 June 2026. The total area under lease has increased by approximately 600 sqm as a mezzanine area on level one has been captured under the lease documentation.
The valuation increase was primarily driven by a:
• tightening of the capitalisation rate by 0.25% to 5.75% due to the additional lease term and diversified tenancy profile; and
• an increase in market rental due to the additional area.
James Freeman, AOF’s Fund Manager said “This transaction diversifies the existing CPSA lease into two separate leases, introducing new medical companies to the portfolio, while maintaining broadly the same annual tenancy income and extending one lease by a further three years, driving a 6.1% increase in independent valuation”.
Whilst AOF could have waited for its net valuation cycle to capture the uplift in value, the ongoing pressure from prospective take over parties has ensured Australian Unity capture any potential valuation gains to sure up its NTA and unit pricing.
Earlier this year, Keppel and Starwood were both bidding or AOF. Keppel eventually dropped their proposal after Starwood offered a 15% premium to the AOF price with $2.98 per unit offer. As the COVID19 impacts became more widespread, Starwood dropped their proposal. AOF are currently trading at 2.15 per unit (-28% below Starwoods offer price).
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