Charter Hall has taken a 21 per cent hit selling a Brisbane CBD office after six years.
Local fund manager Alceon is the buyer, outlaying $73 million for 40 Tank Street, in the city’s legal precinct, near Roma Street station.
The vendor paid Kevin Seymour $93m, reflecting a 5.85 per cent yield; the weighted average lease expiry was 6.3 years predominantly from two tenants, Queensland Police Service, which occupies the 5906 square metre, five level office component, and CarePark, which rents the balance four storey, 312 bay car park.
Alceon renegotiated these rental agreements during due diligence with the government, contributing 52pc of the income, now set to stay until 2028 and the car park operator (which pays nearly 44pc), three years later.
The 6-star NABERS rated asset also contains 312 sqm of retail.
Also this week, Charter Hall secured the Victorian Tertiary Admissions Centre to its near new Wesley Place complex, in Melbourne’s CBD.
VTAC will quit its Park St, South Melbourne, headquarters after over 40 years.
40 Tank Street
On 2106 sqm, 40 Tank St will become vacant just ahead of the Olympics (the WALE is now 5.5 years).
Alceon chose it as part of a strategy to acquire undervalued assets at a counter cyclical time then add value through active management.
“Alceon’s research indicates the Brisbane CBD is the only market nationally where the secondary market is tighter than prime,” Alceon founder and executive director, Todd Pepper, said.
“Therefore, rental growth in the secondary market will underpin growth in the market as a whole and is likely to pressure tenants to upgrade,” he added (story continues below).
“This market characteristic is another factor that has generated strong comparative facing rental growth in Brisbane compared with its peers,” according to the executive.
“The supply outlook for the Brisbane office market is relatively restrained with just three projects committed to 2028 and the availability of good quality, well located contiguous space diminishing very quickly.
“This characteristic is promoting solid rental growth in existing assets and a further tightening of the CBD’s vacancy rate.
“The expectation is that stronger rental growth will also be driven by elevated construction costs that will continue to push up economic rents for new projects, with forecast average net effective rental growth or 4.1pc a year over the next 10 years”.
He added the zoning allows for an unrestricted building height (subject to aviation regulations).
“The car park is a key social infrastructure asset, being one of only six major public car parks in the Brisbane CBD and the only one in the legal precinct,” he said.
“Extremely restrictive town planning will make future public car parking of this scale difficult to build therefore limiting future..supply”.
The property was held equally by the Charter Hall Long Wale REIT and Direct PFA Fund.
The listing was earmarked mid-last year to meet redemption requirements.
CLW also recently banked $85.1m from three industrial assets, in Kingsgrove, New South Wales, Kingston, and Campbellfield, Victoria.
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