Centuria delivers Adelaide Office Development for its Office Fund

13 July 2022

Centuria Office Fund has acquired 57 Wyatt Street, Adelaide, as a fund-through investment into a boutique office building with Centuria Developments responsible for delivery.

The property is currently under construction and completion is expected in the second half of FY23. It was acquired on an as if complete value of $40.2 million, with the developer, Centuria Developments, retaining construction and delivery commitments. The property was independently valued at $41.6 million, based on a capitalisation rate of 5.25%.

The 4,600sqm building is currently 55% pre-leased and is targeting a five-star Green Star rating. When complete, it will offer A-Grade office accommodation and outstanding tenant amenity including a roof top terrace. The site adjoins the Centuria-managed 80 Flinders Street office building and car park.

Grant Nichols, COF Fund Manager commented, “57 Wyatt St will offer quality, boutique office accommodation that will be very attractive to tenants. The acquisition is consistent with COF’s strategy of owning high-quality, young office assets that offer tenants a high level of amenity. Following the recent sale of 131 Grenfell Street, this acquisition also maintains COF’s exposure to Adelaide, and provides exposure to quality, new generation stock that continues to be supported by supply and demand fundamentals relative to the remaining Adelaide office market.”

To fund its strategies, Centuria Office Fund has also completed $257.5 million of debt refinancing and added an additional $50 million of headroom taking its total debt facilities to $962.5 million, across a diversified pool of six lenders.

The debt refinancing increased the REIT’s weighted average debt maturity from 3.3 years to 3.7 years with no debt tranche expiring until FY25. Despite the increased tenure, there has been no material change to the weighted average debt margin. Debt covenants of a 50% loan to value ratio and 2.0x interest cover ratio apply to the new and extended debt facilities, in line with existing covenants.

COF also announced that it concluded external valuations on 12 of its 23 investment properties as at 30 June 2022. Approximately 59% of the portfolio has been independently valued, with the remainder subject to internal or Director’s valuations. The completed valuations reflect the strong sales metrics being generated for quality metropolitan and near city office properties, resulting in a like for like increase of $9.4 million equating to a c.2.0 cents per unit (cpu) increase in net tangible assets (NTA).

Grant Nichols commented, “The majority of the recent transactional activity for Australian office property has occurred in non-CBD markets, demonstrating stronger investment demand for metropolitan office property. Investors see value in these markets due to their comparatively affordable rents offering greater growth opportunities, as a greater share of tenant demand gravitates to these locations.”

Further property valuation details will be available in COF’s full Financial Year 2022 results, which are expected to be released on Tuesday, 2 August 2022.