Centuria Capital Group and MA Financial Group Limited have acquired an A-Grade Adelaide office building in a 50:50 joint venture with each entity committing an equal $83.3 million to the acquisition. The parties will actively pursue other value-add opportunities, which meet the investment criteria of each group.
The 24-level building is located at 25 Grenfell Street, Adelaide SA, and known locally as “The Black Stump.” It is considered a landmark within Adelaide’s CBD skyline. Approximately 72% of the asset’s gross income is underpinned by government and blue-chip multinational professional corporations, providing a four-year Weighted Average Lease Expiry (WALE) and c.90% occupancy.
The A-grade property comprises a c.25,000sqm Net Lettable Area (NLA) with 23 levels of office accommodation with floorplates ranging from 1,044sqm to 1,078sqm, 30-bay basement car parking, end-of-trip facilities, and the ground floor includes 10 retail tenancies. The building is located near major retail precincts, including the Rundle Mall shopping strip, and Leigh and Peel Streets provide a variety of food and beverage options.
Major tenancies include SA Health, PIRSA (Primary Industries), Minister for Energy and Mining, Reserve Bank of Australia, JLL, Aurecon, Lipman Karas and Minter Ellison. The latter recently renewed for a seven-year term.
The property was previously held by Soilbuild REIT who acquired the building in July 2019 for $134m. The property was since revalued by Savills in December 2020 at $138m. The REIT was effectively privatised by the Lim Family in early 2021 with the Australian assets acquired by Blackstone at close to book value. A sale now at $166.6m represents a significant gain for Blackstone in less than 12 months.
Jason Huljich, Centuria Joint CEO, said, “This acquisition represents an opportunity to capitalise on the strong tenant demand for high-quality A-Grade office space within Adelaide’s prime CBD market. Adelaide’s office leasing enquiry levels are trending strongly, above pre-COVID levels, with a 42% increase in the 12 months to Q2 2021.
“We believe we can deliver ‘core-plus’ returns by repositioning this iconic asset to retain and attract high-quality tenants, while also further bolstering leasing demand for the property. Centuria has a strong track record in providing hands-on asset management and in-house office leasing capabilities.
“Throughout 2021, Centuria has successfully launched four single-asset unlisted property funds. Like our recent Footscray and Port Adelaide acquisitions, Grenfell Street is underpinned by resilient Government and blue-chip corporate tenants. We believe these metrics will continue to attract strong investor appetite.”
Centuria’s stake will be part of a new unlisted single-asset close-ended property fund, Centuria 25 Grenfell Street Fund (“Fund”), which is expected to be launched in early 2022. Settlement is expected in December 2022.
Centuria intends to reposition 25 Grenfell Street through CAPEX and refurbishment projects following the Fund’s launch with a target equity raise of c.$47million.
CBRE’s Ian Thomas, Alistair Laycock and Stuart McCann and JLL’s Roger Klem, Luke Billiau, Simon Storry and Kate Low were responsible for 25 Grenfell Street’s expression of interest sales campaign.