GARDA Property Group (ASX: GDF) is taking a $30.5 million hit from the sale of two office buildings in Melbourne’s inner eastern suburb of Richmond which have been snapped up by real estate investment manager Sentinel Property Group.
The properties, with a combined book value of $110.5 million, are being sold to Sentinel for $80 million in a clear sign of risk aversion in the office market for the group.
The sale price is even lower than the already discounted valuation placed on the assets in FY23 when the company slashed the combined book value of the assets from $132 million at the end of FY22.
The Botanicca 7 and Botanicca 9 buildings - located at 572 and 588A Swan Street respectively – were listed as ‘assets held for sale’ by GARDA in its latest financial statements for FY23.
Botanicca 7, anchored by Golder Associates, was listed as 100 per cent occupied at the end of June this year while Botanicca 9, anchored by Fujifilm, was listed as 73 per cent occupied.
The sale to Sentinel, which remains subject to a number of conditions, represents a 39 per cent discount to the book value of the buildings at the end of FY22.
Responding to media speculation that the buildings were under contract, GARDA has confirmed to the ASX that it has entered into a binding heads of agreement with a Sentinel Property Group entity to sell both properties for $80 million.
“The transaction is highly conditional on a number of matters outside the control of GARDA, including successful completion of due diligence, capital raising and finance,” the company says.
“Should a transaction proceed, settlement could occur in late December 2023 with net sale proceeds applied to the partial repayment of drawn variable debt facilities.”
GARDA, which has a property portfolio totalling $650.7 million across Queensland, NSW and Victoria, is weighted towards the industrial sector which accounts for $354.1 million in assets.
The property group’s securities have come under pressure since late 2021 and are currently trading almost 40 per cent below highs of about $1.75 in December that year to $1.09 each.
GARDA notes that at $1.09, its securities are currently trading at a 44 per cent discount to the 30 June 2023 net tangible asset backing of $1.96 per security.
The Brisbane-based Sentinel Property Group has a diversified portfolio of 59 properties held within 14 trusts with a heavy weighting in the retail, industrial and office sectors, including investments in regional markets.
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