IOOF pays Doma Group $52.5 million for modern Newcastle office
IOOF Investment Management is paying $52.5 million for a two year old office in Newcastle.
The seven-level asset at 18 Honeysuckle Drive, with 6524 square metres of fully-leased A-grade area, was offered by Canberra-based developer Doma Group.
IOOF will plug the 5-star Green Star rated building into its Property Income Plus direct portfolio property fund.
The value is the second highest ever paid for a Newcastle investment, selling agency, Colliers International said.
The agency’s national director commercial sales and leasing, Peter Macadam, said the deal was struck on an approximate 6.2 per cent passing yield.
“During the on-market expressions of interest campaign, there was significant interest from institutional and private investors looking for an asset with a well considered tenant profile and WALE of approximately 6.8 years in a prime location,” the agent said.
The vacancy level for A-grade Newcastle offices is currently a low 2.8 per cent “and forecast to fall further”, Colliers International research estimates.
IOOF Investment Management senior portfolio partner Simon Gross described the Honeysuckle Drive asset as modern and with high specifications, in a prime location, and tenanted to a mix of quality government and private tenants.
Seven top tier firms including the New South Wales government rent space within the building, which returns annual rent of $3,235,354. Fixed rental increase agreements are set at between 3.3 and 3.5 per cent yearly.
These factors “and the local economy” drew IOOF to the opportunity, Mr Gross said.
“We are very pleased to add 18 Honeysuckle Drive to our portfolio given the strong fundamentals of the Newcastle market. On average, tenants have nearly seven-years left on their leases and we look forward to building strong partnerships with each of them.”
Colliers International State Chief Executive ACT, Paul Powderly added “This record sale shows strong confidence in the Newcastle market”.
Coincidentally this agency’s Canberra headquarters is in a strata titled retail space on the ground floor of 18 Honeysuckle Drive which sold last March.
The agents described Newcastle’s Honeysuckle precinct as “sought after”. The IOOF office is adjacent to a light rail, transport interchange and Newcastle Harbour.
“Newcastle is the economic hub of the Hunter Region, Australia’s largest regional economy,” the agents promoted.
