Within three short weeks, Centuria Capital Group has raised $133million for its unlisted, fixed-term Centuria Government Income Property Fund (CGIPF), in what could be Australia’s largest retail single-asset capital fundraise within the past 15 years.
Centuria closed the fundraising offer seven days early due to significant demand for the fund, reflecting strong appetite from mum and dad investors seeking high yielding investments in this low interest rate environment.
The details of the Fund offering was featured on Australian Property Markets News [link]
Jason Huljich, Centuria Joint CEO said, “We are very pleased with the strong response to CGIPF and appetite for this five-year fixed-term fund. We knew this was an ambitious undertaking with it being our largest retail fundraise in our 24-year history as well as being Australia’s largest single-asset retail fundraise within the past 15 years. It’s worth noting records don’t go back further than 15 years.
“The fundraise has been a strong demonstration of the appetite from mum and dad investors for high-quality real estate assets that can deliver a resilient revenue stream, underpinned by strong tenant covenants. More than 90% of the property’s rental income is derived from government tenants who collectively provide an 11.8-year Weighted Average Lease Expiry(WALE). This means the tenancies are secured for longer than the fund duration, providing peace of mind with regard to stable rental revenue.
“The response to this capital raise is a further demonstration in the long-term confidence of high-quality office assets. We believe decentralised, fringe and suburban offices have been better performing assets than their CBD counterparts because they provide excellent worker commutability, are often modern and require limited capital expenditure, and offer affordable rents, which improves the likelihood of high rental collection and, therefore, fund income.”
CGIPF’s single asset is a 14-level $224million office building in Footscray, Victoria. The A-Grade office building, located at 1 McNab Avenue, Footscray, was secured with 100% occupancy at a market capitalisation rate of 4.7%.
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% in FY22 and the fund has an initial five-year term.
The Victorian Government has identified Footscray for its 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).
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