Weekly Transaction Update – 20th April

21 April 2018

This week we recorded 5 major transactions worth $351M. The largest deal this week the sale of Brandon Park Shopping Centre by Vicinity Group for $135M. This was the second sub regional disposal by Vicinity in as many weeks having sold a 50% interest in the Browns Plains Centre last week. Brandon Park was acquired by Redhill Partners on a yield of 6.25%. The Centre which is anchored by Coles, Kmart and Aldi has an NLA of 23,122 sqm. Also this week Morgan Stanley Investment Platform acquired a 50% interest in 699 Bourke Street from TH Real Estate for $102M. The A Grade building contains 19,300sqm of commercial space which is fully leased to AGL until 2025. TH Real Estate acquired their 50% interest in a fund through deal in 2014 for $74.5M. The sale to Morgan Stanley was struck on a yield of 4.9% providing TH Real Estate with a cool $27M profit. Not all property investments are successful and the investors in 441 Murray Street Trust have experienced. The 441 Murray Street Trust was established under Trafalgar Property Group in August 2001 to acquire and hold the 5,941 sqm B grade building in Perth for a period of 10 years. The asset was fully leased to the WA Police with a lease expiry in 2017. In April 2011, unitholders approved the extension of the trust to October 2016. In 2013, the property was valued at $28.1M and in that year the management of the trust was transferred to 360 Capital Group. At this time, office vacancy was rising slowly to 7% and tenant demand was declining, however most groups predicted a moderate softening. By early 2016, however it became clear that the tenant would vacate the building. The Unitholders agreed to extend the term of the trust to 2019 to enable the asset to be released and a full refurbishment of the building was undertaken with new BMS and lighting systems, new chillers, three new lifts, and re-painting of the building’s full exterior. The works were completed by late 2016 however in the midst of an increase in vacancy across the market (now at 22%), the building remained vacant. 360 Capital was acquired by Centuria in late 2016 and despite the extensive works, the value of the property was written down to $22M. This week Centuria announced the fully vacant asset to Redhill Partners for $22M. The better decision in hindsight was to have sold the building in 2012 with several years left on the existing lease and a some semblance of a rising market. Of course this is easier said than done. Also sold this week was 1 Fitzwilliam Street, Parramatta, owned by the listed Singaporean group Raffles Education Corporation who acquired the asset in 2014 for about $30 million. The Raffles group converted the building to a permanent campus for their College of Design and Commerce. The Group is now under an exclusive heads of agreement with Property Link to sell the asset for $82M. Scroll through the list below or head to RE-Intel for further details. * indicates unconfirmed price or apportionment of a portfolio sale