Centuria Property Funds Limited sells Parramatta office to SC Capital Partners for $105.3 million

Centuria Property Funds Limited paid $45.05 million for 2-10 Wentworth Street, Parramatta, in late 2014.


Centuria Property Funds Limited has sold a Parramatta office at 2-10 Wentworth Street to Singapore’s SC Capital Partners, banking $105.3 million.

The property was the sole asset in the unlisted Centuria 2 Wentworth Street Fund, which was closed-end with a five year term.

CPFL – a subsidiary of the ASX-listed Centuria Capital Group (CNI) – paid Charter Hall $45.05 million for the A-grade Parramatta building in December, 2014.

Just last week we reported that Charter Hall’s Direct PFA Fund sold the office across the road: 9 Wentworth Street was purchased by a private investor for a headline $64.25 million.

Also last month, a first time Australian property investor from Taiwan, Wentruth Pty Ltd, settled on the $80 million purchase of 1-3 Fitzwilliam Street, Parramatta.

This seven level, 9677 sqm office with 102 car parks was fully let – returning annual rent of $4.3 million.

It was sold by a subsidiary of Singapore’s Raffles Education Corporation after an $82 million deal reported last year with Propertylink didn’t proceed.

Raffles paid $29 million for 1-3 Fitzwilliam Street in 2014.

The total return to investors for 2-10 Wentworth Street is 186 per cent

Of the 2-10 Wentworth Street sale, CNI joint chief executive officer Jason Huljich said Fund investors will receive a total return of 186 per cent “including an average distribution return of 9.2 per cent”.

The Fund’s five year internal rate of return (IRR) is 25 per cent.

The sale price reflects a 5.6 per cent passing yield.

CNI will bank a performance fee of about $9 million following settlement of in the first quarter of 2020.

“When we purchased Wentworth Street in December, 2014, our view was that the Parramatta office market was poised to benefit from a number of positive factors, including improving infrastructure links, the decentralisation of NSW government departments and the overall gentrification of the area” Mr Huljich said.

“At the same time, A-grade office vacancy was below 1 per cent which we believed could support greater tenant appetite for quality office products, which in turn would mean upward pressure on rents – which the Parramatta market has seen in recent years”.

Built in 1989, the nine-level building contains 10,940 square metres of lettable area.

It occupies a 2339 sqm block about 24 kilometres west of the Sydney CBD.

Mr Huljich added that during the life of the Fund, CNI completed leasing transactions for over 90 per cent of 2-10 Wentworth Street (9807 sqm).

The rental, he said, increased 34 per cent from an average $497 per sqm/pa, to $617 per sqm/pa.

Cushman and Wakefield’s Steve Kearney, Simon Fenn, Mark Hansen and Claire Zouroudis, with CI Australia’s Bevan Kenny and Andrew Hunter marketed the Parramatta office.

Centuria has been an active buyer this year

Last week we reported that Centuria Diversified Property Fund (CDPF) outlaid $27.8 million for twin offices in Melbourne’s south east Mulgrave.

A month earlier CDPF spent $65.4 million on an office in Brisbane’s inner north east Bowen.

In May, it paid $35 million for Canberra’s Optus Centre.

In July, Centuria Industrial REIT paid $22.8 million for a North Geelong distribution centre leased to Quicksilver.

Last October, the same fund spent $42 million on a 5.6 hectare high-profile logistics centre at 1 International Drive, Westmeadows, abutting the Tullamarine Freeway near Melbourne Airport

CNI, with a joint venture partner, businessman Paul Lederer, last year invested $645 million on a portfolio of four offices, in Sydney, Melbourne and Brisbane.

…but it has also sold

In June, we reported that an unlisted Centuria fund, and BlackRock, sold Chatswood’s Zenith Centre twin-tower office complex for $438.2 million.

The consortium paid Dexus and GPT $279.1 million for this north Sydney investment in 2016, before re positioning it.

Centuria banked a $15.7 million performance fee following this disposal.

Another fund sold a half share of 8 Central Avenue, in Sydney’s Australian Technology Park – banking $191 million (this deal delivered an IRR of 25 per cent. Centuria’s performance fee was $9.2 million).

Actively keeping tenants happy, a key: CNI

Mr Huljich said CNI maintained value for its 2-10 Wentworth Street unitholders by keeping close relationships with tenants and actively responding to their needs.

“Quality tenants underpin the strong, reliable income streams that investors have come to expect from our unlisted funds, which is why we are so focused on maintaining and improving our properties to ensure excellent leasing outcomes.

“We have a history of excellent through-cycle performance,” the executive added. “Similar to 2-10 Wentworth Street, Parramatta, our recently completed Centuria 8 Central Avenue 1 Fund and Centuria Zenith Fund delivered attractive IRRs of 20 per cent and 23 per cent respectively”.

“Additionally, at least five of our funds have been included in the top ten funds in an IPD/MSCI index each quarter for the past 11 quarters, which we believe is a strong endorsement of the quality of our funds and our active management approach”.

Mr Huljich said CNI will now look for more assets in which it can add value and produce income and capital growth return.

SC Capital Partners

The Singapore based real estate management firm SC Capital Partners has close to US$7 billion in assets under management within a variety of closed ended funds, and listed REITs.

Last week it paid $107.8 million for an office at 412 St Kilda Road, in Melbourne.

Last month, with joint venture partner Fortius, it paid Frasers Property Australia and Sekisui House $174 million for three assets in Sydney’s $2 billion Central Park development.

Central Park Mall, DUO Retail and Park Lane Retail, all developed in 2013, offer a total of 14,600 square metres of gross floor area.

The Parramatta office at 2-10 Wentworth Street achieves an average rent of $617 per square metre, per annum. When CNI picked up the asset, it was earning a comparable $497 psm/pa.

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Marc Pallisco

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