This article originally appeared in Australian Property Journal.
Real Asset Management (RAM) has pounced on an A-grade office tower in Brisbane, paying $141.1 million on a beefy 7.03% yield for 333 Ann Street, where it is eyeing off rental growth opportunities.
It was bought off-market from ASX-listed Growthpoint Properties at just above June’s $140 million book value.
The fully occupied 16,301 sqm tower has a 4.15-year weighted average lease expiry with tenants including the federal government, Brighter Super and Federation University.
“We are at a point in the cycle where taking a position in pre-existing, well-let assets with long-term contracted income is very attractive. But more importantly, RAM, as an active manager, continues to pursue opportunities to further diversify and enhance both income and longer-term growth prospects of the portfolio under management,” said RAM head of real estate, Matthew Strotton.
“This attractive deal is accretive to fund WACR, increases exposure to the high growth Brisbane market, is in a desirable CBD location and provides access to strong contracted rent growth as well as potential value-add opportunities.”
Average rents in the building are reportedly in the mid-$600 per sqm range, below the CBD’s average of the low $700s. Brisbane CBD office vacancies came down from 15.4% to 14% in the six months to July.
“RAM was attracted to the high-quality Queensland asset as the state has a strong economic outlook and leads the charge in Australia’s economic recovery with nation-leading jobs growth and interstate migration fuelling historically high levels of population growth,” it said.
333 Ann Street is just 150 metres from Brisbane’s Central rail station and RAM said it is well-positioned to benefit from the “enormous infrastructure investment and the expected social and economic benefit the games will drive”.
According to MSCI Real Assets there was $2.4 billion worth of office transactions in Brisbane over the year to the end of the September quarter, a slight dip of 6%. Among recent deals in the CBD was Mirvac’s divestment of 189 Grey Street in Southbank last month for $104.4 million to Marquette Properties, while Australian Unity Office Fund has put the 19-level 150 Charlotte Street tower occupied by Boeing Defence and the Australian government on the block.
333 Ann Street will become the fifth asset in the RAM Diversified Property Fund, an unlisted property fund targeting a diversified and defensive property portfolio, which has total commercial real estate assets valued at almost $500 million in four states. They include the inner Brisbane office building campus once headquarters to Virgin Australia, which it bought at the end of last year for $71 million, and the Alan Woods office building in Canberra that it picked up for $115.1 million.
For Growthpoint, the sale follows its $165 million acquisition of a suburban Melbourne office building in Dandenong occupied by the Victorian state government in May, and a $125 million buy of a fully-leased office building closer to the CBD, in Hawthorn, for $125 million that is leased to Siemens Healthineers, Cabrini Health and Miele.