Weekly Transaction Update – 17th May

19 May 2019

This week we recorded just 26 major transactions worth $760m Oxford sell Canberra complex The sell off of the Investa Office Fund by Oxford continues with the sale of 18 Mort Street Canberra to Charter Hall who are in the final stages of due diligence on the asset. Charter Hall are set to pay approx $105M for the A grade 14,506sqm commercial building which is fully leased by Telstra with a 6.7 year lease expiry. The sale at $105M will reflect a cap rate of 5.85% and a capital value of $7,238/sqm of NLA. It is expected that Charter Hall’s Long WALE REIT will be the purchaser. The REIT aims to give investors stable income and capital growth through exposure to a portfolio of properties with a strong tenant profile and long lease expires. Investa acquired the asset in 2011 when it acquired the ING Office Fund. The sitting tenant vacated the asset in 2012 and Investa elected to spend $18M in a comprehensive refurbishment to improve it to an A Grade building with a NABERS rating of 4.5 stars. The strategy attracted Telstra who stepped in to lease the whole building for a 12 year term. Cushman & Wakefield acted for Investa. Stockland sells 2nd Coloundra Centre Stockland continues to off load non core assets at substantial discounts with a 2nd sale in Caloundra with the larger Caolundra North Shopping Centre now likely to be acquired by Charter Hall Retail REIT in a deal worth about $105m. Stockland held the North and South Caloundra Centres in its book for $145M and a cap rate of 5.75%. It sold Caloundra South late in 2018 for $20.7M, leaving a book value of $124.3M. A sale to Charter Hall at $105M would take the total discount across both centres to 13%, matching the discount take on the recent sale of their Cleveland Centre. Caloundra Shopping Centre comprises a fully enclosed sub-regional shopping centre anchored by both a Coles Supermarket and Kmart Department Store, plus 42 specialties, 3 kiosks, 3 ATMs and 3 pad-sites. The centre is the largest retail destination in an expansive trade area and features the only DDS in the primary and secondary trade areas. The Charter Hall Retail REIT has been a disciplined purchaser in recent years, acquiring 3 other centres over the past 18 months (Rockdale Plaza, Gateway Plaza and Campbellfield Plaza). It’s stated strategy is to acquire larger sub regional centres which dominate their trade areas with solid income growth potential. Stockland has been reworking its portfolio and has also been seeking capital partners for major assets, including on its $800m Shellharbour centre. Stockland switch to Industrial at Gregory Hills Stockland today announced it has acquired a new 13.09 hectare parcel of land at Gregory Hills in south west Sydney for $47.13 million, as it continues to grow its workplace and logistics portfolio to greater than 25 percent of total assets. Located on the border of the well-known Smeaton Grange industrial precinct and Gregory Hills bulky goods retail precinct, the site provides good connectivity with close proximity to M5 and M7 Motorways, part having exposure to Camden Valley Way, and benefits from growing infrastructure just 24 kilometres from the Western Sydney Airport site. Stocklands’ “miss” on the industrial sector will take some time to get right. Currently logistics accounts for 16 per cent of Stockland’s asset base, or about $3.3 billion, compared with its $23 billion residential communities business and a retail property portfolio worth $7.2 billion. Stockland will continue to offload retail and residential assets as it attempts to re-weight its portfolio. SC Capital move on Dexus Canberra asset Singapore-based SC Capital has acquired Canberra’s Finlay Crisp Centre for $62 million from Dexus. The purchase price represents a capital value of just $2,066/sqm, however SC Capital will partner with local asset manager Artifex Property Group to undertake a $50m overhaul to reposition the complex to win more tenants. The centre, which comprises three buildings — Customs House, Allara House and Nara Centre — occupies an entire city block and sits on an 8,844sq m site with frontages to Constitution Avenue, Allara Street and London Circuit. The total net lettable area of all three buildings is almost 30,000sq m. The fully occupied buildings are leased to Commonwealth Government and ACT Government tenants until 2019 and 2020. The potential impacts of substantial near term vacancy and the need to spend a significant amount of capital to improve the asset had been a deterrant to the market for some time. Dexus first put the building on the block in 2016 with a book value of $82.0m and a cap rate of 9.25%. After it failed to sell, Dexus revised the book value to $70.2m with a 9.0% cap rate. In 2018, Dexus revised it the value down again to $63m on an 8% cap rate. The purchase by SC Capital just a day after SC Capital announced the acquisition of Rivervale Mall in Singapore from AEW Capital Management for $170 million. In March it also unveiled plans for a $700m mixed-use hotel and office tower Sydney for which it will seek investors later this year. Review our other transaction data at ReSourceData. * indicates unconfirmed price or apportionment of a portfolio sale #ReDataSource