EG Heads West to Buy Blue-Chip Commercial Tower for $79m

Sydney-based fund manager EG has acquired an A-grade office building in Perth's CBD for $79 million.

The 12-level office tower, located at 2 Mill Street, was listed by Brisbane-based superannuation fund Sunsuper in August, which it purchased in 1997 for $35.6 million.

The commercial property, close to Elizabeth Quay and the Perth Convention Centre, has secure parking for 38 vehicles as well as end-of-trip facilities and river views.

The building is currently 70 per cent leased and has the potential of reaching a fully leased net annual rent of $7 million.

Current tenants include Minister for Works, Chamber of Minerals & Energy and the Institute of Chartered Accountants, with with a weighted average lease expiry of approximately two years and advertised net annual rent as of June sitting at $495 per square metre.

Founded 20 years ago by property veteran Michael Easson and brothers Shane and Adam Geha, EG has moved from strength to strength and currently has $2.4 billion in assets under management with investments spread across a number of unlisted funds.

The acquisition is the second property secured under the $800 million Australian Core Enhanced Fund which is actively targeting underperforming office, retail and industrial assets.

The fund's first acquisition, made in August, saw the $36 million purchase of a two-level commercial building and industrial warehouse in Kurnell, a 30-minute drive from Sydney Airport.

EG's latest purchase, further afield in Perth's mineral-rich boom and bust economy, is a blue-chip acquisition, adjacent to the Parmelia Hilton Hotel.

“This asset is perfectly positioned to benefit via a targeted refurbishment and leasing strategy as Perth experiences improving macroeconomic conditions,” EG fund manager Dan Farley said.

Perth's economy and office leasing demand, driven off the back of activity in the oil and gas sectors, as well as iron ore, is now seeing the emergence of a wide range of industries looking to bed down in the CBD.

According to the latest figures from JLL, Perth has seen steady improvement in its office market, with the city's vacancy rate falling by a full percentage point in the third quarter of 2019, but it is still high overall at 19.4 per cent.

Diversification in the CBD, now home to student accommodation, cinemas, and major new retail, office and lifestyle hubs, has also increased vibrancy and bolstered the city's office markets resurgence.