Centuria Launches its Largest Single-Asset Unlisted Fund

10 June 2021

Centuria Capital Group has secured a 14-level $224million office building in Footscray, Victoria, for a new unlisted fixed-term, single-asset fund, Centuria Government Income Property Fund (CGIPF).

CGIPF will seek to raise $133million, which is Australia’s largest single-asset retail capital raise within the past 15 years.

The A-Grade office building, located at 1 McNab Avenue, Footscray, was secured with 100% occupancy on a 11.8-year Weighted Average Lease Expiry (WALE) at a market capitalisation rate of 4.7%.

The 20,191sqm building was constructed in 2014 and includes nine levels of office accommodation, four levels of secure parking and benefits from strong sustainability credentials, including 5.5-Star NABERS energy and water ratings.

The asset is underpinned by strong tenant covenants with 91% of the building leased to Victorian Government departments and agencies including City West Water (32.5%), State Trustees Limited (31.1%) and the Victorian Government’s Treasury and Finance Department (27.5%). The remainder of the office accommodation is leased to quality professional services.

CGIPF forecasts a starting distribution yield of 5.25%iii,iv in FY22 and the fund has an initial five-year term[v].

Jason Huljich, Centuria Joint CEO, said, “Centuria has a 22-year track record for delivering successful fixed-term unlisted funds. This will be our largest capital raise to date for a single-asset unlisted fund with a target of approximately $133million. In fact, it’s the largest retail equity raise undertaken in Australia for a single-asset fixed-term unlisted fund within the past 15 yearsi.

“In this low interest rate environment, there is a strong appetite from retail investors who are searching for investments with compelling yields. We continue to witness this strong appetite with the oversubscription of our recent unlisted fundraisings.

“In FY21 to date, our unlisted division has executed six capital raises across four single and multi-asset fund mandates. Combined, we have raised over c.$184 million to deploy across attractive unlisted real estate opportunities throughout Australasia.

“With rising white-collar employment and workforces increasingly returning to the office, we believe office asset investments will increasingly deliver strong results. Already within the past few months, we’ve witnessed several large office transactions in the domestic market.”

The office building is located within the gentrifying, inner city Melbourne suburb of Footscray, approximately 6.5 kilometres from the CBD. This fringe market is benefiting from significant infrastructure investment, the expansion of government services within the area in addition to high residential demand. The area’s population is forecast to almost double by 2041.

The Victorian Government has identified Footscray for a new government work precinct. It is creating five government work hubs for Victorian Public Service (VPS) in metropolitan Melbourne areas to allow workers to be in close proximity to their homes. The hubs will accommodate up to 2,380 public servants each week. 1 McNab Avenue will be the first government work hub in operation.

The Footscray asset is well positioned with excellent public transport connectivity with rail and bus interchanges within 200m of the building. It is also a short distance from the Docklands Highway (east) and Princes Highway (west).

Following the merger with Primewest becoming unconditional, Centuria will be one of the largest unlisted property fund managers in Australasia with c.$10billion of AUM across its unlisted platform and more than $16 billion of AUM across the Group platform.

CGIPF’s capital raise is expected to open from Thursday 1 July 2021 and anticipated to close 28 July 2021.

Knight Frank’s Paul Kempton was the appointed agent on the 1 McNab Avenue sale.