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Centuria Capital Group (ASX: CNI) is paying $454 million for a 50 per cent interest in two A-grade office buildings in Sydney CBD's World Square precinct in a move the company says provides an opportunity to acquire the assets below replacement cost amid a constrained supply environment.
The buildings, located at 680 George Street and 50 Goulburn Street, will underpin the single-asset unlisted Centuria Sydney CBD Prime Office Fund which will be offered to its investor network, including private capital and institutions, with an equity raise of about $268 million.
Centuria is acquiring the stake from an investment vehicle managed by global funds manager Brookfield with the remaining half-share held by a domestic real estate investment management group.
“We are deploying capital into a repriced Australian office market, where dislocation has created a window to acquire an institutional-grade CBD asset significantly below replacement cost and at an attractive income yield,” says Jason Huljich, Centuria's joint CEO.
"New supply is structurally constrained, while existing stock continues to be withdrawn or repositioned, reinforcing the medium-term outlook for prime assets.”
Centuria says the deal is priced at a 60 per cent discount to estimated replacement cost and provides a capitalisation rate of 7.5 per cent, which the group says reflects an attractive proposition compared to recent Sydney CBD office transactions.
“The fund provides a rare opportunity for everyday Australian investors to share direct ownership in a high-quality Sydney CBD building with a strong and diverse tenant profile, embedded rental growth and reversion potential," says Huljich.
“This purchase is the latest in a series of increasingly larger property acquisitions we have made, our two previous acquisitions totalling $216 million and $168 million, respectively, and our intention is to continue to scale-up acquisition size to underpin Centuria’s AUM (assets under management) growth.”
The Sydney CBD assets are integrated within the World Square mixed-use precinct, providing 67,700sqm of net lettable area across 45 levels with a four-year WALE (weighted average lease expiry) and 93.4 per cent occupancy.
Anchor tenants include NSW Government departments, as well as national and multinational occupiers.
Centuria says the opening of the Gadigal Sydney Metro Station has been an important driver of the revitalisation of Midtown, serving around 15,700 passengers a day since its opening in 2024.
“This is an unparalleled opportunity to secure a high-profile, Prime Sydney CBD asset acquired at a compelling price point, supported by strong tenant demand and improving sector tailwinds,” says Andrew Essey, Centuria’s chief investment officer.
“The Sydney CBD office market continues to outperform wider national office markets as it’s exposed to Australia’s largest white-collar workforce, leading to the strongest net absorption across all major Australian cities in 2024 and 2025.
“Additionally, the Midtown precinct has been the outperformer over this period, recording the highest net absorption of all Sydney CBD precincts.”
Essey says Midtown is undergoing a “renaissance” through improved connectivity via the new transport nodes, particularly along the CBD’s spine, through which the light rail and Metro run.
“The asset sits on the doorstep of the World Square Shopping Centre, offering an exceptional dining and retail experience with 45 food and beverage outlets, 100 retail shops and a Coles supermarket, attracting more than 24 million visitors per year,” he says.
Centuria, which has a real estate investment portfolio of more than $20 billion, manages 63 office buildings worth $6 billion across Australia and New Zealand on behalf of listed and unlisted funds.
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