Singapore-listed property trust, Suntec REIT, has made its first investment outside of Sydney and Melbourne after striking a deal to buy the Allianz Centre in Adelaide for $148.3 million.
The sale of the 12-storey A-grade tower at 55 Currie Street to the ARA-managed REIT was struck on an attractive initial yield of 8 per cent.
The vendor was private syndicator Arc Equity Partners, jointly owned by Chris Redmond and David Schultz, which acquired 55 Currie Street for $81 million from Aspen Group in 2011.
It's the fifth $100 million-plus sale of an Adelaide office tower in just over a year, highlighting the growing appetite for commercial assets outside of the fully priced Sydney and Melbourne office markets, where average yields are now well under 5 per cent.
In December, a new venture between Melbourne-based investment firm Wingate and Chris Lock's IP Generation scooped up another A-grade Adelaide office tower at 77 Grenfell Street for $103.5 million at a initial passing yield of about 8.4 per cent.
The string of big Adelaide office deals kicked off in May last year when Financial Review Rich Lister Paul Lederer partnered with property fund manager Centuria Capital Group on the $184.6 million acquisition of 80 Grenfell Street from Blackstone.
The abolition of stamp duty in South Australia on commercial property transactions, which began last year, has also made Adelaide a more attractive destination for global capital.
Suntec REIT's acquisition of 55 Currie Street adds to its 100 per cent ownership of 177 Pacific Highway, an A-grade office building in North Sydney and 50 per cent stakes in two Melbourne assets, the Southgate mall and Mirvac's new Olderfleet office tower development at 477 Collins Street.
It recently acquired the Workshop building under development at 21 Harris Street in Pyrmont, Sydney, for $297 million.
"We are pleased to expand our footprint in Australia with the acquisition of 55 Currie Street, a grade A office building situated in the heart of Adelaide’s central business district," ARA Trust Management chief executive Chong Kee Hiong said.
Mr Chong said the investment was underpinned by a "strong cash flow of high quality office tenants" that would deliver an initial net property income yield of 8 per cent.
The office tower, which offers net leasable area of 26,200 square metres, sold 91.6 per cent leased, with the Commonwealth and State governments, insurer Allianz and software group Data Action the main tenants.
A 27-month rent guarantee was provided by the vendor over the vacant portion of the tower, which last year underwent a major refurbishment including the installation of solar panels and end-of-trip facilities.
Suntec REIT based its investment on a strong economic outlook for Adelaide, which it believes will create jobs and demand for office space.
Adelaide still has one of the highest vacancy rates among the major CBDs at 14.2 per cent, according to the most recent Property Council Office Market Report, though this has been steadily falling.
A-grade net office rents in Adelaide average $370 a square metre – unchanged over the past 12 months – with incentives at a high 33 per cent, according to the latest March quarter Savills office report.
Suntec REIT buys Adelaide office tower on 8pc yield by Larry Schlesinger originally seen in the Australian Financial Review 16 July 2019.
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