Fund manager Sentinel Property Group has sealed a $72-million deal for a 15-storey office tower in Brisbane’s CBD as it continues to circle what it deems “mispriced assets”.
The sale price is less than half the asset’s estimated replacement value of $152 million.
Sentinel’s acquisition of RACQ House at 60 Edward Street continues the group’s counter-cyclical investment spree as the office market bottoms out.
“There are better conditions now for those able to buy than in the GFC,” Sentinel chief executive Warren Ebert said.
As the current market conditions and construction challenges prevail, he said the group would be pursuing more office, retail and industrial assets
“We are seeking mispriced assets from motivated sellers.”
Ebert said increases in building costs and the demand for construction work were having a major influence on the commercial property market, particularly in Queensland.
“The [Queensland] government is committed to spending many billions of dollars on infrastructure in the lead-up to the 2032 Olympics, and the work is tied up with union contracts.
“Nothing else of scale is going to get built in Queensland cities in the coming years, particularly new office buildings and shopping centres, while the state continues to experience significant population growth,” he said.
“We expect there to be enormous price growth for existing assets and strong rental growth.”
RACQ purchased the Edward Street office tower in 2014 for $60 million as its headquarters and undertook a refurbishment.
It has been acquired by Sentinel on a yield of 9.34 per cent with a secure income stream from tenants RACQ and the Commonwealth Government.
On a prominent 1836sq m site bordering the city’s so-called Golden Triangle office precinct, the 10,637sq m building has more than 100 carparking spaces and is less than 250m from the new Albert Street Cross River Rail Station.
The fund manager raised more than $50 million from investors to complete the deal for the asset, which will be held in its new Sentinel 2032 Investment Fund.
The deal was negotiated by JLL’s Seb Turnbull, Paul Noonan and Kate Low.
Sentinel this year finalised an $80-million purchase of two office buildings in Botanicca Corporate Park in the Melbourne’s CBD fringe, for almost 33 per cent below replacement cost and a 39 per cent discount on the property’s April 2022 book value of $132 million.
