SC Capital Buys Sydney Office Building From Centuria for A$105M

SC Capital Partners has announced that it has inked a deal to purchase a grade A office tower just outside of Sydney for A$105.3 million ($72 million), as the company doubles down on its exposure in Australia.

The Singapore-based private equity firm is acquiring the office property at 2-10 Wentworth Street in Parramatta from Centuria Property Funds through its open-ended SCORE+ Fund, which invests in core and core-plus real estate assets in Asia Pacific.

The acquisition is the company’s third Australian purchase in less than two months through its SCORE+ and RECAP funds.

“Two Wentworth Street is an excellent addition to the SCORE+ Fund portfolio and is consistent with its strategy of acquiring well-located and stable, income-generating assets,” said SC Capital Partners’ chairman Suchad Chiaranussati.

Sydney-based Centuria announced separately that it had exchanged contracts on Two Wentworth Street five years after purchasing the property for A$45.1 million.

Banking on a Government Tenant

Located on the northeastern corner of Wentworth Street and Parkes Street in Parramatta’s business district, SC Capital’s latest Aussie prize has 10,940 square metres (117,757 square feet) of net lettable area spread across one floor of retail below nine levels of office space.

Constructed in 1989 and fully refurbished five years ago, Two Wentworth Street is fully leased with 93 percent of its rental income derived from New South Wales government tenants and a weighted average lease expiry of 6.2 years, according to property agents Cushman & Wakefield.

The property’s average rental income has increased from A$497 per square metre per annum in 2014 to A$617 per square metre per annum currently, according to Centuria Property Funds.

“With its prominent location in one of the most attractive office markets in Australia, the property is well poised for continued strong growth, supported by robust market fundamentals,” said SC’s Khun Suchad.

Exiting at a 25% IRR

Sydney-based Centuria, which held the property as the sole asset in a closed-end unlisted vehicle, has sold the asset at the completion of the fund’s five-year term, at an internal rate of return of 25 percent.

“When we purchased Wentworth Street in December 2014, our view was that the Parramatta office market was poised to benefit from a number of positive factors, including improving infrastructure links, the decentralisation of NSW government departments, and the overall gentrification of the area,” said Centuria’s joint-CEO Jason Huljich, who added that the Parramatta market had seen an upward pressure on rents in recent years.

The latest data available from the Property Council of Australia shows grade A office vacancy in Parramatta standing at 0.6 percent for the first half of the year, while SC Capital said that market fundamentals are expected to remain strong, supported by a New South Wales government pledge to invest A$10 billion in public and private initiatives in Parramatta, which it has targeted as a “Priority Growth Area”.

The Singapore-based private equity shop also highlighted in its announcement that Parramatta, which is billed as Sydney’s “second” CBD, is predicted to house half of the population of Sydney by 2020.

Riding a Wave of Aussie Purchases

The acquisition of Two Wentworth Street is the latest in a wave of Aussie investments by SC Capital.

Just under three weeks ago, the company entered into a binding agreement to buy the former St Kilda Road police complex in Melbourne for A$107 million through its opportunistic RECAP fund series.

A month before that Melbourne purchase, the firm teamed up with with Australia-based Fortius Funds Management to buy three shopping centres in Sydney for A$174.5 million, jointly acquiring the assets through its RECAP series.

Singapore’s biggest cross-border investor, GIC, also chose Parramatta for an office investment last month, as the sovereign wealth fund teamed up with Australian property group Charter Hall to acquire a landmark building just one kilometre north of SC’s new purchase.

In its JV with Charter Hall, GIC took a 90 percent interest in the A$415 million purchase of the Jessie Street Centre in Parramatta, with the Australian group taking the remaining stake, according to sources familiar with the matter who spoke to Mingtiandi.