Centuria Property Funds Limited, the responsible entity for the Centuria Metropolitan REIT, today announces that the Fund has entered into an unconditional agreement to acquire a 50 per cent direct interest in 203 Pacific Highway, St Leonards.
The Property is part of the Forum, a mixed use complex located above St Leonards railway station. CMA will pay $43.0 million before costs for its 50 per cent interest in the Property, reflecting an initial yield of 8.0 per cent. Settlement is scheduled to occur on 7 December 2015.
Nicholas Blake, Trust Manager, said, “The acquisition of a 50 per cent interest in 203 Pacific Highway further strengthens the underlying security of the Fund’s income with a mix of long term leases to high quality tenants. St Leonards is a key Sydney metropolitan location that is expected to benefit from a continuing reduction in competing supply.”
The remaining 50 per cent direct interest in 203 Pacific Highway will be acquired by a newly established Centuria unlisted retail investor office property syndicate for the same consideration as that to be paid by CMA.
Mr Nicholas Collishaw, CEO Listed Property, said “The acquisition of 203 Pacific Highway by CMA and a Centuria unlisted property syndicate demonstrates the depth of Centuria’s business, which can be leveraged to ensure a positive outcome for all investors across the listed and unlisted platform.”
203 Pacific Highway is an A-Grade office building constructed in 2000 with a net lettable area (NLA) of 11,737sqm over 11 levels and 150 car parks. The Property is 100% occupied with a weighted average lease expiry (WALE) of 5.0 years (by NLA).
The key tenants include:
• Primary Health Care (approximately 35% by NLA);
• Cardno (approximately 30% by NLA); and
• Verizon (approximately 30% by NLA)
The Property is held on a leasehold from the State Rail Authority of New South Wales with 73 years remaining.
The acquisition of a 50 per cent interest in 203 Pacific Highway for $43.0 million represents an initial yield of 8.0 per cent. The 50 per cent interest in the Property has been externally valued at $43.5 million representing a capitalisation rate of 7.75 per cent. The acquisition will be debt funded through an extension to CMA’s existing NAB facilities with pro forma gearing expected to increase to 33.8 per cent upon settlement.
The acquisition is forecast to be accretive to the Fund’s FY16 distributable earnings by approximately 2.5 per cent. The Fund’s distribution guidance is maintained at 17.0 cents per stapled security representing a distribution yield of 8.6 per cent on the closing price of $1.98 per stapled security as at 30 September 2015.
The Fund’s net tangible assets per stapled security will decrease by 0.5 per cent to $1.96 reflecting transaction costs associated with the acquisition.