Centuria pays $256 million for Canberra’s Nishi building

Centuria Metropolitan REIT (CMA) is paying $256 million for the Nishi building, an A-grade commercial complex in Canberra’s gentrifying Civic precinct.

The deal, between CMA’s parent Centuria Capital Group (CNI) and developer Molonglo, is being struck on a 5.1 per cent capitalisation rate.

CMA fund manager Grant Nichols said the purchase reinforces the Fund’s position as the country’s largest listed pure-play office REIT.

The Fund today also announced plans for $195 million in capital raising initiatives to finance it.

It additionally cancelled the public sale campaign of a suburban Brisbane office, saying its ACT acquisition satisfactorily reduces the Fund’s Queensland weighting,

The Nishi building

Completed in 2013, the 12-storey Nishi building at 2 Phillip Law Street contains 27,411 square metres of lettable area – 99.5 per cent of which is tenanted, predominantly to the federal government.

A hotel, shop and gallery adjoining the office was listed with it last month: combined the two assets were expected to trade for about $330 million.

Following Molonglo’s sale of Nishi, the hotel and retail investment will now be offered separately.

The properties form part of a mixed-use community the developer has been creating for about 20 years, which also includes public spaces and a heritage-listed hostel built by the federal government for civil servants, and which has been refurbished.

Molonglo acquired the site overlooking Lake Burley Griffin in 1996.

The Nishi office was marketed as Canberra’s best commercial investment, by selling agents, Colliers International’s Paul Powderly, Brendan Jones and Steve Phillips, with JLL’s Tim Mutton and Rob Sewell.

“The building…is highly recognised with several industry leading awards, including ‘Best International Project of the Year’ by the Building Awards in London,” Mr Nichols said – adding that, with this purchase, the average age of investments within CMA’s portfolio decreases to 15.2 years (from 16.4 years).

The Nishi office (right) has views over Lake Burley Griffin. The Shine Dome is behind it.

Underwritten institutional placement and non-underwritten unit purchase plan now on the cards

CMA now plans to raise $185 million via an institutional placement at $3 per unit – a value, it said, is a 4.8 per cent discount to the last (December 9) closing price.

The placement will result in approximately 61.7 million shares being created – and which represents about 13.7 per cent of the Fund’s existing issued capital.

The group added that the circulated units will rank equally with existing CMA shares from the date of issue and be entitled to the distribution for the quarter ending 31 December 2019 (4.45 cents).

Separately, CMA will raise up to $10 million via a unit purchase plan.

CMA numbers post Nishi settlement

Mr Nichols said that with its Nishi acquisition, structured rental growth with fixed rental reviews for the portfolio will average 3.34 per cent annually.

“CMA’s portfolio metrics are also enhanced with a total portfolio value expanding to $2.1 billion and weighted-average-lease-expiry increasing from 4.8 years to 5.1 years,” the executive added.

CNI will have invested more than $700 million in central Canberra commercial property this year.

“Geographic diversification is improved as the acquisition increases the portfolio weighting to the ACT, which is Australia’s fourth largest office market, from 5 per cent to 16 per cent,” Mr Nichols said.

Federal government tenants now account for 54 per cent of CMA’s rental income, the executive added.

Valuations see portfolio worth increase 3.4 per cent

Other than the Nishi acquisition and capital raising plans, CMA reported that it has revalued eight of the 22 properties within its portfolio, as at December, 2019.

The capital gain, it said, totals $30.8 million – a rise of 3.4 per cent on the last quarterly appraisals.

CNI activity this year, outside of Canberra

CNI said today it is withdrawing from sale an office at 483-517 Kingsford Smith Drive in Brisbane’s Hamilton – citing Queensland’s satisfactorily reduced geographic weighting within CMA following its ACT acquisition.

Last week, CNI’s unlisted Centuria 2 Wentworth Street Fund sold a Parramatta office for $105.3 million.

The week earlier, Centuria Diversified Property Fund (CDPF) picked up twin offices in Melbourne’s Mulgrave, paying $27.8 million.

CDPF paid $65.4 million for an office in Brisbane’s Bowen in October (and $35 million for Canberra’s Optus Centre in May).

Two months ago, CNI spent $89 million for a commercial building at 348 Edward Street in the Brisbane CBD, for its Centuria Property Funds No 2 Limited.

The vendor, US-based Hines, picked up this asset, also known as the IBM building, for $49 million three years earlier.

In September, CNI acquired a half stake of the Seven Network headquarters, 8 Central Avenue, in Sydney’s inner south Eveleigh, for $191 million.

Also in that month it paid $189.5 million for William Square, Northbridge, in Perth.

Both these investments were purchased on behalf of CMA.

In July, Centuria Industrial REIT outlaid $22.9 million for a North Geelong distribution centre tenanted to Quiksilver.

In June, CNI spent $127 million for an office at 80 Flinders Street in the Adelaide CBD, for a new Fund.

Last October, CNI with businessman Paul Lederer paid $645 million for a portfolio of four offices on Australia’s east coast.

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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of realestatesource.com.au.