Forza Capital has picked up a B-grade Brisbane CBD office for $86.75 million.
The deal for 340 Adelaide Street, with Mirvac, is being struck on a fully leased 7.5 per cent yield.
To fund it, the purchaser will use part a $240m trust – the Priority Framework – created after the March COVID lockdown to seek “opportunistic property investments” and backed by wealthy advisory groups and families.
The Queensland asset is the first acquired with that money.
For Mirvac Property Trust, which has held the 17 storey building, the sale price reflects an 11pc premium on the ($78m) June 2020 book value.
The Oracle building at 340 Adelaide Street
Mirvac purchased 340 Adelaide St in 2009 and has over the last five years undertaken a major renovation of the lobby, ground floor plane and retail components.
The property’s key tenants are Oracle, which has upper level naming rights, and Cover-more, the Attorney General’s Office and Cerebral Palsy League.
At the south east corner of Wharf St, it contains 12,834 square metres of workspace and 100 car parks in three basement levels.
It is seven per cent vacant with a 3.8 year Weighted Average Lease Expiry.
Forza Capital director Ashley Wain said 340 Adelaide St “represents exceptional value with a comprehensive refurbishment program undertaken by Mirvac over the past five years and a broad spread of tenants providing a highly diversified cashflow and lease expiry profile”.
The executive added uncertainty in office markets is creating attractive investment metrics which, when combined with competitive debt funding, should result in an eight per cent per annum distribution yield each year until 2026 (story continues below).
Office uncertainty + competitive debt funding = opportune purchaser environment
Adam Murchie, Forza Capital director, added the Brisbane acquisition raised $52.5m from its Priority Framework clients.
“Shortly after COVID struck, Forza identified the opportunity to prepare our investor base of sophisticated investors for opportunistic property investments,” the executive added.
“Speed to transact was anticipated to be critical and we believed getting early capital commitments and being able to transact quickly would be paramount to securing new investments on attractive metrics.
“The property due diligence period was completed within a month and settlement 14 days thereafter, which we believe is critical in times like these.
“Both parties benefit from a high degree of transactional certainty”.
CBRE’s Tom Phipps, who marketed 340 Adelaide St with Flint Davidson, said “as the first major, post COVID Capital Markets transaction in the Brisbane CBD, this deal highlights the demand from onshore investors for quality office assets”.
The agent added historically low financing costs were driving yield compression in the Queensland capital at present.
“As travel restrictions ease we expect the market to awaken in the first half of next year fuelled by…Brisbane’s attractive yield spread,” according to the executive.
Mirvac will redeploy proceeds, chief investment officer, Brett Draffen, saying “the sale demonstrates the ongoing demand for quality office assets in Brisbane and supports our strategy to increase exposure to prime and A-grade assets which we believe will further enhance the resilience of our office portfolio”.
The vendor will also allocate funds to grow its asset creation business, residential and next-generation office communities and precincts.