Singapore-listed Ascendas REIT (A-REIT) has bought a 14-storey office tower on the outskirts of Brisbane for A$83.83 million ($66.6 million), marking the trust’s second acquisition of an office property in Australia.
The office deal in Brisbane, capital of the state of Queensland, will supply A-REIT with an asset that provides an anticipated yield of over 7.1 percent, and follows the purchase of a downtown Sydney office tower last month by the trust’s sponsor, Ascendas-Singbridge Group.
The industrial-focussed REIT, which has total assets of about S$10.2 billion ($7.5 billion) in Singapore and Australia, is ramping up its presence down under following the disposal of its entire China portfolio.
Brisbane Office Asset Offers High Yields
A-REIT is acquiring the freehold office building at No. 100 Wickham Street, about 450 metres from Brisbane’s core business district, according to a statement by the trust. The fully occupied, 43-year-old property has 13,131 square metres of total lettable floor area and a two-level basement car park.
“With a pipeline of major infrastructure projects, such as the Cross River Rail and Queen’s Wharf development in Brisbane, we believe that this is an opportune time to expand into a CBD fringe office property,” said Chia Nam Toon, CEO of the trust’s manager Ascendas Funds Management, in the statement.
“No. 100 Wickham Street is an attractive deal with a potential NPI yield of 7.1%,” Chia added. “We are optimistic about the long term growth potential of the area, and will continue to look at other accretive investments.”
The trust is acquiring the property from a group of private investors affiliated with Keystone Private, a Queensland wealth management firm, according to local newspaper The Courier-Mail. Keystone is achieving a 68 percent profit from the sale, after buying the building from Australia’s Fortius Funds Management in December 2015 for A$50 million.
Keystone boosted the value of the building by leasing out 80 percent of the space to the Queensland government’s Department of Health, and increasing the average lease term of the property to 4.8 years, according to a report in The Australian. The building is also tenanted by three data centre operators.
A-REIT expects the property will benefit from the A$110 million ($87 million) revitalisation of the Howard Smith Wharves, which will bring a luxury hotel, parkland, and food and beverage venues to the nearby riverside area by late 2018, along with other infrastructure projects, including an upgrade of the Brisbane Airport and the city’s new metro system, scheduled to come online in 2022.
Industrial-Focussed REIT Explores Aussie Offices
A-REIT first entered Australia in November 2015, by buying a portfolio of 26 logistics properties in Sydney, Melbourne and Brisbane for around A$1 billion ($802 million). The trust purchased the assets from the real estate arm of Singaporean sovereign wealth fund GIC and Frasers Property Australia.
In September of last year, A-REIT picked up its first Aussie business park property, a pair of eight-storey grade A towers in a South Sydney office park for A$143.4 million. The REIT added to its logistics portfolio this past April by acquiring a prime logistics property in an industrial suburb of Melbourne for A$24.8 million.
The Brisbane acquisition will boost A-REIT’s exposure to Australian properties from 14 percent of its total portfolio to 15 percent, according to a presentation deck from the company. In its most recent annual report, the REIT said it would scale up its existing portfolio of A$1.3 billion ($1 billion) in Australia and continue to build up its local team in the country.
Last year, A-REIT disposed of its entire portfolio in China, selling Ascendas Z-Link in Beijing to Cova Beijing ZPark Investment in May 2016; A-REIT Jiashan Logistics Centre outside Shanghai to Goodman Group in June; and Shanghai’s A-REIT City @Jinqiao to China Vanke in November – for a total price of S$407.6 million.
The parent group of A-REIT’s manager, Ascendas-Singbridge, is also deepening its investments in Australia. The Singaporean commercial developer scooped up 66 Goulburn Street, a 24-storey grade A office tower in Sydney’s Midtown precinct, from ASX-listed GDI Property Group for for A$252 million ($200 million).
The deal marked the state-backed developer’s second office acquisition in Australia after picking up a North Sydney office building for an undisclosed amount in March 2016.