Backed by the security of a state government lease, Centuria Capital Group (ASX: CNI) has forked out $62.75 million for one of Port Adelaide’s biggest office buildings.
The deal is seen as a sign of confidence in the office sector, and particularly the growth prospects for Port Adelaide - the centre of the federal government’s $90 billion submarine project.
The A-grade property, located on the corner of Nile and Robe Streets, was completed in 2018 and was a key initiative by the South Australia Government to provide economic stimulus for Port Adelaide’s central business district.
It is fully leased to Shared Services SA and the Urban Renewal Authority providing Centurion with an 11.1-year Weighted Average Lease Expiry (WALE), supplemented by fixed annual rent reviews of about 3 per cent a year.
The property has been bought by the group’s new single-asset close-ended, unlisted real estate fund Centuria Government Income Property Fund No. 2. The asset will deliver a 5.25 per cent starting distribution in 2022, rising to 5.3 per cent in 2023.
“Centuria remains confident in Australia’s metropolitan and near-city office markets, especially those that benefit from long-term government-backed infrastructure projects,” says Centuria’s joint-CEO Jason Huljich.
“The high-quality Nile Street office building is situated in the heart of the state-backed Port Adelaide Rejuvenation Project, a 20-year regeneration initiative that is anticipated to attract up to 8,000 additional residents and 1,500 construction jobs.”
Huljich says Port Adelaide is the ‘gateway’ to the federal-backed Osborne naval shipyard, which will deliver $90 billion of naval defence infrastructure over the next 50 years.
“Nile Street provides a compelling investment proposition, providing strong tenant covenants and resilient revenue streams,” he says.
“Additionally, its exemplary sustainable features, and being a young property, prevents capital expenditure leakage, providing value for investors.”
The Centuria Government Income Property Fund No. 2 has a target equity raising of $35 million which will be open from 25 October to 19 November.
It comes on the heels of Centuria completing Australia’s largest single-asset retail capital fundraising within three weeks in August this year, securing $133 million from investors for a $224 million A-Grade office building in Footscray. That building was more than 90 per cent leased to the Victorian Government.
“Launching a second government-backed income real estate fund caters to the strong appetite for high-quality income streams for our 12,000-investor network and delivers on our strategy to provide quality, decentralised office investment opportunities,” says Huljich.
Centuria oversees a portfolio of $11 billion in unlisted real estate trusts.
Shares in CNI are down 1.14 per cent to $3.47 per share at 1.14pm AEST.
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