Charter Hall’s Direct PFA Fund has sold a Parramatta office to a private investor for $64.25 million – or $62.6 million once outstanding lease incentives are deducted.
The Sydney-based fund manager and developer, which has embarked on a spending spree which may be the hallmark of the commercial property sector this year – said the “excellent” Parramatta result was 15.9 per cent in excess of the asset’s 30 June, 2019, valuation.
Charter Hall unsuccessfully tried to sell the asset four years ago as part of a $700 million portfolio of commercial and industrial properties.
The seven-storey predominantly glass structure, built in 1988, is at 9 Wentworth Street, near Parramatta train station, about 26 kilometres west of the Sydney CBD.
It includes 87 car parks and 7651 square metres of lettable area – 94 per cent of which is office, and fully occupied.
The tenant list includes the federal government (which occupies almost a third of the building), Australian Business Academy and Australian College of Nursing.
Despite a ground floor retail vacancy, the investment returns annual rental of $3.57 million.
On that basis – and not using the headline price – Charter Hall has sold the asset on a 5.7 per cent passing yield.
The office occupies a 1627 sqm plot with longer term development upside.
Charter Hall Direct chief executive officer, Steven Bennett, said the transaction is consistent with the Direct PFA Fund’s strategy of holding long WALE (weighted-average-lease-expiry) assets.
“The WALE of 9 Wentworth Street is 3.6 years, whilst the average WALE for the overall Fund portfolio prior to the sale was 7.9 years, thereby providing accretion to the portfolio” the executive added.
Sale proceeds, Mr Bennett said, will be invested into high quality assets with longer WALEs, like the recently acquired Macquarie Park office complex, leased to the government for 12 years, which cost Charter Hall $165 million.
Following the disposal of 9 Wentworth Street, Charter Hall Direct PFA Fund holds 14 office investments throughout Australia. The portfolio WALE is also slightly higher (8.1 years).