CENTURIA Capital has completed Australia’s largest retail single-asset capital fundraising within the last 15 years, with $133 million raised to support its purchase of an inner Melbourne office building leased to the Victorian government.
Fundraising was closed seven days early “due to significant demand” for the five-year fixed-term Centuria Government Income Property Fund (CGIPF), established after Centuria bought the Footscray asset at 1 McNab Avenue from the Grollo family for $224 million in June.
“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,” Centuria joint CEO Jason Huljich said.
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 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.”
More than 90% of 1 McNab Avenue’s rental income is derived from government tenants including City West Water, State Trustees Limited and the Treasury and Finance Department. The government is using the 14-level A-grade building as the first of its five government work precincts for public service workers to be in close proximity to their homes.
The government tenants collectively provide an 11.8-year weighted average lease expiry, beyond the fund duration, while the balance of the building is leased to professional services.
The building was acquired on a market capitalisation rate of 4.7%. CGIPF forecasts a starting distribution yield of 5.25% in FY22.
