Growthpoint purchases $165m government office in Dandenong

Growthpoint purchases $165m government office in Dandenong

165-169 Thomas Street (Provided)

Growthpoint Properties Australia (ASX: GOZ) is continuing to bolster its office portfolio after snatching up an A-grade complex in Dandenong for $165 million from Dandenong GSB.

The acquisition of the 15,071sqm building – situated at 165-169 Thomas Street – will be funded using debt and accretive to the REIT's fiscal 2023 Funds From Operations (FFO).

The majority (96. 8 per cent) of the building is occupied by the Victorian Government, with the remainder of the building leased out to eight ground-floor retail businesses. The long weighted average lease expiry (WALE) is 9.5 years.

Growthpoint purchased the building – which offers seven floors of office accommodation and secure basement parking for 204 vehicles – on a 5.3 per cent initial income yield.

“We are pleased to acquire this high-quality, long-WALE asset with high green credentials that is centrally located in Dandenong, the hub of Melbourne’s growing south-east region,” Growthpoint managing director Timothy Collyer said.

“The acquisition further increases Growthpoint’s exposure to government covenants in strategic urban locations and is a great addition to our portfolio, supporting our strategy to maintain a portfolio of modern, high-quality resilient assets which meet our tenants’ needs now and into the future.”

Constructed in 2011, the office building is located 30km south-east of Melbourne and is “well-positioned for transport and retail amenities” as it is “approximately 400 metres from both the Dandenong railway station and regional shopping centre Dandenong Plaza".

“Aligned with Growthpoint’s office portfolio, the asset has high ESG credentials, achieving a 5.5 Star NABERS Energy rating, 6.0 Star NABERS Water rating and 6.0 Star Green Star rating,” Growthpoint said.

The buyout comes after the state government’s Revitalising Central Dandenong initiative attracted $700 million in private investment, which will be used to rejuvenate the city centre and enhance the suburb’s appeal as a place to reside.

The state government first announced the project in 2006, committing $290 million to restore the economic prominence of the region.

“We are confident in the market’s long-term outlook with recent urban renewal investment supported by further government investment initiatives,” Collyer said.

“In addition, the federal government’s $15 billion infrastructure investment in the south-east will further improve transport connections.”

“This includes the Port of Hastings Inland Port Facilities with an associated intermodal facility and freight rail connection from Melbourne to Dandenong South (including removal of related road and level crossings to reduce congestion) and an upgrade to the Cranbourne Packenham rail line which will reduce travel times and provide a direct link to Melbourne airport through the Metro tunnel.”

The sale remains subject to the approval of the Foreign Investment Review Board (FIRB) and the satisfaction of settlement conditions.

Growthpoint anticipates the conditions will be met in the coming weeks.  

Shares in GOZ are up 1.04 per cent to $3.90 each at 12:00pm AEST.

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