This article is from the Australian Property Journal archive
A RECORD year for Canberra’s office market is delivering deals right into its final days, with ASX-listed Growthpoint joining the frenzy and picking up the ACT Department of Health offices for $84.6 million.
Office deals this year in the national capital have already breezed past the $1 billion mark – well ahead of the decade average of $375 million – and a late-year flurry of deals could take that close to $1.5 billion as investors seek assets tenanted by the resilient government sector.
The latest deal has seen Altis Property Partners exceeded expectations for the six-level, 12,376 sqm Woden Town Centre building at 2-6 Bowes Street in Phillip. Built in 1986 and comprehensively refurbished in 2017/18, the building is home to the ACT government’s Health Directorate and the ACT COVID response team, as well as federal government offices, and was offered with 96% occupation and a 9.2 year weighted average lease expiry.
“We are pleased to have exchanged contracts to acquire an A-grade office asset in the ACT, with high occupancy and a long WALE, increasing our investment in this market to $261 million,” Timothy Collyer, managing director of Growthpoint said.
“The property is located in the suburb of Phillip, regarded as ‘Australia’s Public Health Hub’, which will benefit from ongoing government investment in infrastructure and transportation links.”
Growthpoint is fund the acquisition using debt. It said yesterday it has also entered into two new facilities of $75 million each to fund future property acquisitions.
The deal arrives a week after Singaporean sovereign wealth fund GIC partnered with Charter Hall to acquire the federal government-tenanted 50 Marcus Clarke Street in Canberra for $335 million.
Canberra recorded 11,100 sqm of net absorption and a reduction in vacancy to 6.5% over September quarter, while prime grade vacancy sharpened to 3.6% and is below the 4.0% mark for the first time since 2008.
CBRE data last week showed the Canberra office market currently tracking $1.17 billion in total office sales this year – well ahead of the decade average of $375 million – with another $300 million in sales in the pipeline.
Yields have tightened by 50 basis points for prime assets.
Growthpoint’s portfolio growth
Growthpoint yesterday announced the preliminary external valuations over 74% of its assets indicate a $256 million uplift in value across its portfolio of office and industrial assets, equating to 7.5%, and which will take its net tangible assets up by $0.33 to $4.50 per security pro forma.
It upgraded funds from operations and distribution guidance to at least 27.0c per security and 20.8c per security.
“This uplift has been driven by leasing success across both our office and industrial portfolios, alongside favourable market conditions. There continues to be further yield compression across the industrial sector, with recent sales setting new benchmarks.
“Investor confidence in the office market is improving, as leasing markets appear to have stabilised, driving an increase in sales activity and yield compression for A-grade, well-leased assets.”
Its industrial portfolio value has grown by 9.6%, or $125 million, and the average market cap rate came down by 30 basis points to 4.7%. Office assets increased $131 million, by 6.2%, while cap rates firmed by 20 basis points to 4.9%.
Collyer said the group has also taken advantage of record-low pricing to extend $715 million of existing debt facilities, lowering average cost of debt by 23 basis points and extending weighted average debt maturity by 2.6 years.
