Investa Office Fund (IOF) announces it has exchanged contracts to acquire 66 St George’s Terrace, Perth for $82.375 million. The 11,447 square metre A-grade office building is centrally located in the core of the Perth CBD. The price paid reflects an initial yield of 8.1% after acquisition costs, and is forecast to generate additional earnings of 0.4 cents per unit in FY13. The acquisition will be funded from existing debt facilities and gearing post acquisition will be 25.5%, the bottom of the Fund’s 25% – 35% target range. The building is currently let at a low average rent of $550 per square metre, and has a 1.8 year weighted average lease expiry. The short lease expiry profile will allow the Fund to capture value uplift through crystallising the estimated rental reversion of 15%.
Toby Phelps, Fund Manager of IOF said: “Due to the strength of our balance sheet and low gearing levels the Fund is well placed to acquire assets at what is an opportune time in the cycle. IOF is underweight in Perth, which is currently the strongest office market in Australia. This asset will improve portfolio diversification and allow the Fund to capture short-term rental growth potential from the current low vacancy levels and strong tenant demand in this market.” In addition to the accretion to earnings, the acquisition is in line with our strategy of investing in investment grade CBD office properties and leveraging Investa’s management platform to improve the Fund’s risk-adjusted returns.”
Investa Office Fund (IOF) is an ASX-listed real estate investment trust (A-REIT) and is included in the S&P/ASX100 index. The Fund is a leading owner of investment grade office buildings and receives rental income from a tenant register comprised predominately of Government and blue chip tenants. IOF has total assets under management of AU$2.5billion with investments located in core CBD markets throughout Australia and select offshore markets in Europe. IOF’ strategy is to reposition the portfolio to an Australian only focus. Investa Property Group is a fully integrated real estate company and one of the largest unlisted owners of commercial real estate in Australia. Since its inception in 2000, Investa has grown to control real estate assets of approximately AU$8.4 billion.