Centuria Investors Triple Their Money With Sale of Sydney CBD Property

27 September 2017

Centuria Property Funds today announced a significant profit on the sale of a Sydney CBD office property, Swire House. The 10 Spring Street, Sydney property was purchased in 2013 for $91.64 million and has sold for $270.05 million.

The record breaking price for a B-grade office sale in Sydney means Centuria’s investors’ equity investment tripled over the four years in addition to their income return of 8% per annum.

The final sale price is an outstanding outcome for investors, reflecting a capital value rate per square metre of $19,477.

Speaking about the sale of the property, Jason Huljich, CEO Unlisted Property Funds for Centuria, said he was unsurprised by the strong level of buyer interest.

“High quality properties in such an excellent location don’t often come onto the market, and 10 Spring Street has the advantage of appealing to a range of buyers,” said Mr Huljich.

“We believed it would be attractive for purchasers looking to buy and hold the property, with a strong passing net income and the upside of fixed annual rental increases of around 4%. In addition, the weighted average lease expiry (WALE) is relatively short at around three years, offering the chance to capitalise on the strong demand for B-grade office space in the Sydney CBD when leases come up for renewal,” Mr Huljich said.

According to the Property Council of Australia, the Sydney CBD is currently experiencing its lowest vacancy rates in close to a decade, and net effective rents in B grade offices have increased by 60% in 2016 alone.

Mr Huljich went on to explain that the lease expiry profile also means that buyers looking for prime development opportunities were excited by the property.

“The site is large, at 1505sq m, has dual street frontages, and will benefit from the new infrastructure and transport initiatives currently under construction. Furthermore, any development would result in spectacular views over Sydney Harbour.

“Prior to the sale, we worked with our architects on the redevelopment potential of the site and we were able to show interested buyers two broad indicative schemes. One involves redevelopment of the existing property, and a second envisages amalgamation with surrounding sites to create a significant mixed-use development,” Mr Huljich said.

While the building was 20% vacant at the time of acquisition, Centuria was attracted to the property because of its prime location, in what is now a Strategic Site as identified in the City of Sydney Draft Planning Strategy 2016, providing the potential to construct a tower of up to 290 metres in height. In addition, Centuria’s active management of the property, including a program of upgrades and investment, has seen record B-grade rents achieved of up to $1,200/sq m and the building becoming fully leased.

In conclusion, Mr Huljich said that Centuria was very pleased with sale price of 10 Spring Street, and explained that the decision to sell was made in line with the Group’s overarching strategy.

“10 Spring Street has been a spectacular performer for our investors since we purchased it in 2013, but the time is right for us to sell and to redirect the funds to other investment opportunities where we believe we can add more value in the future,” Mr Huljich said.

The sale was handled by Josh Cullen and Rick Butler of INC RE and Simon Fenn, Graeme Russell and Ben Azar of Savills Capital Transactions.

Simon Fenn said “10 Spring Street attracted aggressive local and offshore capital looking to secure an asset that has the potential to be part of a rare super site in the future whilst also offering the immediate opportunity to capitalise on the strength of Sydney’s B grade leasing market.” 

Josh Cullen added “This result is a clear demonstration of the strong appetite from various sources of capital seeking to enter into the Sydney market.”

 
 

Key Contacts

Simon Fenn

Simon Fenn

Managing Director - NSW

Savills Sydney

+61 (0) 2 8215 8888

 

Graeme Russell

Graeme Russell

Director
Capital Transactions

Savills Sydney

+61 (0) 2 8215 8947