As part of its strategy to sell off inessential assets, Brisbane-based Cromwell Property Group (ASX: CMW) has finalised the sale of its CBD head office to investment firm Wingate for $108.5 million today.
The sale of 200 Mary Street, Brisbane, which is located in the city’s golden triangle, represents a premium to book value of 8.1 per cent after settlement adjustments.
While the transaction is expected to settle before 30 June 2022, CMW will remain headquartered at the site until its lease lapses on March 2024.
Cromwell chief investment officer Rob Percy said the sale to the Melbourne-based company “further demonstrates Cromwell’s proven approach to active portfolio and asset management”.
“We have created significant value through repositioning the asset and, with high quality tenants and long-term leases in place, now is the right time to capture significant upside and unlock the value Cromwell has achieved,” he added.
Cromwell initially acquired the office tower in 2001 from AMP, with the property only 124 metres from the Brisbane GPO and offering views over the Brisbane River, hinterland and the CBD.
The property comprises 13,352sqm of office space, with the ground floor granting access to reception and one retail tenant.
The building also provides entry to three level basement carparks, accommodating up to 194 vehicles.
Wingate’s existing co-investors have been offered the opportunity to participate in the investment, with quarterly distributions expected to commence at 5.5 per cent per annum. It is forecast to increase to 6.25 per cent per annum during the initial investment term, with a target net equity internal rate of return (IRR) in excess of 11 per cent per annum.
“Wingate is excited to offer co-investors the opportunity to invest in a property that is located in a highly desirable part of Brisbane’s CBD, directly opposite the Waterfront precinct,” Wingate property executive director Dan Farley said.
"Futhermore, the property is expected to benefit from more than $12 billion of nearby capital works, primarily during the hold period, on the Waterfront precinct, Cross River Rail, Queens Wharf, Brisbane Metro, and Brisbane Live, in the lead up to the 2032 Brisbane Olypmics," he added.
200 Mary Street is currently leased to 32 tenants, including investment firm IOOF Services and Secure Parking. The sale was negotiated by CBRE’s Peter Chapple, Bruce Baker and Tom Phipps.
“Cromwell has actively managed the asset since it was acquired…progressively refurbishing and modernising the quality B-grade building to attract quality tenants and ultimately deliver optimal returns for securityholders,” CMW said in an ASX announcement today.
“The sale progresses Cromwell’s announced strategy to sell non-core assets, as it transitions to a capital light funds management business in the future, and progressively launches new funds.”
The deal comes after CMW recently completed the sale of the Village Cinema Centre in Geelong for $19.775 million and the exchange of contracts on the TGA Complex in Symonston, ACT – which is anticipated to settle at the end of June 2022.
CMW said that the sale of these “non-core assets” will release more than $140 million of capital for the group, which will be used to “reduce gearing prior to reinvestment in more strategically aligned initiatives.”
The sale also comes more than a year after CMW co-founder and CEO Paul Weightman retired due to boardroom spills, which was followed up with corporate raider Dr Gary Weiss unanimously being voted in as chair.
Shares in CMW are down 0.38 per cent today at $0.79 each at 2:47pm AEST.
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