Centuria splashes out $256m for Canberra office building

Centuria splashes out $256m for Canberra office building

13 December 2019

Proving to be a real endorsement for Canberra, Centuria Metropolitan REIT has bought the A-grade NewActon Nishi Building in Canberra – named best international project of the year in 2015 – from local developer group Molonglo in a deal worth $256 million.

The deal increases Centuria’s portfolio weighting in Canberra from 5 per cent to 16 per cent.

The building, which has a net lettable area of 27,411 sq m, and weighted average lease expiry of 7.9 years, traded at a cap rate of 5.1 per cent. It’s just one of four Canberra buildings to sell for more than $200 million in the last decade.

“It’s a real endorsement for Canberra and actually it’s an endorsement of building quality, building for the long-term and recognising at the end of the day that the value of buildings are really beyond the bricks and mortar, they are the people that occupy them, the people that visit them, the strength and the happiness of tenants is reflected in the underlying value of buildings,” Molonglo director Nikos Kalogeropoulos told The Australian Financial Review.

Centuria will partially fund the acquisition with a $185 million capital raising at $3 per unit as well as $10 million via a unit purchase plan.

CMA fund manager Grant Nichols said, “The acquisition continues to strengthen the quality of CMA’s income streams, underpinned by leases to Federal Government tenants covering 54 per cent of rental income, and structured rental growth with fixed rental reviews averaging 3.34 per cent per annum.”

“Nishi provides excellent amenity for the New Acton and Civic precincts while the large floorplates create an efficient design that can incorporate a range of government or corporate tenants,” said Mr Nichols.

JLL’s Tim Mutton and Rob Sewell and Colliers International’s Paul Powderly brokered the sale of the complex that they dubbed one of the country’s best mixed-use precincts.

The sale includes the office component, the Ovolo Hotel and a cinema.

 “The sale attracted strong interest from major domestic and international investors who were keen to acquire one of Australia’s true land mark properties,” JLL’s ACT head of sales & investments Tim Mutton said.

“Investors were drawn to the strong architectural vision, tenant quality, and diversified income profile underpinned by the Commonwealth of Australia and corporate occupiers such as Clayton Utz and Oracle.”

“Traditionally Canberra has been designed with a separation of uses in mind – it has had areas designated for residential for people to live, separate areas designated for people to work and separate places for people to make, so industry has also been separated and and there are even separate retail zones for places to shop,” Mr Kalogeropoulos said.

“But when you look at all the real vibrant cities – and I think the administration in Canberra has now recognised that – the intersection and overlap of those uses actually create really interesting an exciting human collisions, if you like, so for us Dairy Road really provides an opportunity on a large scale to bring all of those uses together.”

“Bringing Nishi to fruition has been more than a decade of intense work for Molonglo and the decision to sell it has been a difficult one,” Molonglo creative operations director Dan Honey said.

“We are satisfied we have found the right purchaser in Centuria to steward Nishi into the next decade.”