Abacus Property Group (ASX: ABP) has sealed a major Sydney CBD office deal with the acquisition of 77 Castlereagh Street for $250 million.
The leasehold deal gives Abacus a foothold in one of Sydney’s busiest retail precincts as the B-grade office building is located above Westfield Sydney and adjacent to the Myer shopping centre.
The building comprises 11 levels of office space each with floorplates of about 1,200sqm and occupancy is currently sitting at a healthy 95 per cent.
The $250 million deal pitches the sale at $18,995 per square metre of net lettable area and a capitalisation rate of 4.63 per cent.
Abacus sees plenty of upside potential for the property with current rents ‘significantly below market’ and plans to convert it to A-grade space. The property currently offers Abacus investors a fully-leased yield of 4 per cent.
The 77 Castlereagh Street building, which has been bought on a long-term lease with 296 years remaining, is expected to benefit from the completion of Martin Place Metro Station in 2024.
“Being integrated above Westfield Sydney, a world-class retail offering, the acquisition continues the Abacus theme of acquiring assets with good amenity and a clear path to income growth,” says Abacus managing director Steven Sewell.
“With a pathway to medium-term repositioning, this is a great opportunity for the group to implement active asset management strategies and transition the building to an A-grade standard which will unlock rental reversions and ultimately deliver long-term sustainable returns for our stakeholders.”
The acquisition, which is expected to settle in January, will be funded from existing debt facilities.
Meanwhile, Abacus has revealed that property appraisals of more than a third of its portfolio have led to an increased of $175 million in the value of the assets.
The unaudited valuations represent an increase of 5 per cent which the group says lifts its pro forma net tangible assets to 30 December by about 21c per security to $3.64. This is up 6 per cent on the 30 June 2021 figure.
The latest valuations saw an increase of 7 per cent in the Abacus group’s self-storage assets while commercial assets were up 2 per cent.
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