CENTURIA Capital Group has bought a $224 million office building in Melbourne’s inner west from the Grollo family for a new unlisted fund, and will seek to raise $133 million in what is Australia’s largest single-asset retail capital raise in the past 15 years.
Centuria will place the A-grade, 14-level building at 1 McNab Avenue in Footscray within in the fixed-term Centuria Government Income Property Fund (CGIPF).
The fully occupied asset has a 11.8-year weighted average lease expiry, and 91% leased to Victorian government departments and agencies including City West Water, State Trustees Limited, and the Treasury and Finance Department. The remainder of the office accommodation is leased to professional services.
On the sell side are Bruno Grollo and his children Adam and Leeana, who took control of the building when the family’s property empire split in 2012, along with other assets including a half-share in QV Melbourne. Their brother Daniel, who took over the development arm, Grocon, is currently dealing with the business’s collapse and narrowly avoided its liquidation with a deed of company arrangement late last month.
Completed in 2014, the 20,191 sqm Footscray building includes nine levels of office accommodation, four levels of secure parking and features 5.5-Star NABERS energy and water ratings. CGIPF acquired the asset at a market capitalisation rate of 4.7% and Centuria forecasts a starting distribution yield of 5.25% in FY22 for the fund, which has an initial five-year term.
Jason Huljich, Centuria joint CEO, said this would be its largest capital raise to date for a single-asset unlisted fund, and is the largest retail equity raise undertaken in Australia for a single-asset fixed-term unlisted fund within the past 15 years.
“In this low interest rate environment, there is a strong appetite from retail investors who are searching for investments with compelling yields. We continue to witness this strong appetite with the oversubscription of our recent unlisted fundraisings.” Huljich said.
“In FY21 to date, our unlisted division has executed six capital raises across four single and multi-asset fund mandates. Combined, we have raised over c.$184 million to deploy across attractive unlisted real estate opportunities throughout Australasia.
“With rising white-collar employment and workforces increasingly returning to the office, we believe office asset investments will increasingly deliver strong results. Already within the past few months, we’ve witnessed several large office transactions in the domestic market.”
Footscray is about 6.5 kilometres from the CBD. The Victorian government has identified the suburb for a new government work precinct as part of its five work hubs for public service workers to be in close proximity to their homes, and 1 McNab Avenue is the first hub in operation.
Rail and bus interchanges are within 200 metres of the building and is a short distance from the Docklands Highway and Princes Highway.
Centuria is in the process of a merger with Primewest, which will create a platform with more $16 billion of assets under management.
Knight Frank’s Paul Kempton was the appointed agent on the 1 McNab Avenue sale.