Boutique fund management group Realside have acquired 170 Pacific Highway St Leonards for $42m.
The property is a fully leased, substantially refurbished, office building with a weighted average lease expiry of approximately 3.9 years, diversified across multiple tenants. The property contains 116 car bays (1 bay per 38 sqm of office area), excellent natural light from windows on three sides, and elevated outlooks including harbour and CBD views to the south. The property generates $2,699,017 in net income per annum producing a passing yield of 6.4%.
Identified by the NSW State Government as a priority precinct, the St Leonards area is undergoing major changes, underpinned by the new Metro station due to open in 2024. Currently supported by the existing St Leonards Train Station, the suburb boasts a highly accessible and central location between the commercial hubs of Chatswood, North Sydney and Sydney CBD. St Leonards is known for its thriving office market and world-class healthcare facilities.
Realside reported that the buildings tenants have not required rental relief during the recent Covid’19 shutdown and that all tenants have now substantially re-occupied their tenancies, demonstrating the stark difference between suburban office tenants and their CBD counterparts.
Post Covid’19, Realside expect the suburban markets to continue to perform well given lower rental levels, higher car park ratios and generally lower scale enabling employees a quick and efficient transition into their own office environments without spending long periods in crowded lift lobbies.
The Property has a Development Approval to add an additional two storeys of office space (1,670 sqm) however the group are yet to consider whether any additional work is feasible.
Realside raised $23.55m of equity from wholesale investors, offering a distribution yield of 7.5% with a total IRR target of 10.6% over an anticipated 5 year initial investment term, based on gearing of 55%.
The property was sold by Property Bank Australia via CBRE.