Centuria sells Sydney CBD Spring Street building for $270 million

Centuria sells Sydney CBD Spring Street building for $270 million
Centuria sells Sydney CBD Spring Street building for $270 million

Centuria Property Funds has sold the Swire House in Sydney CBD for $270.05 million, nearly triple the amount it paid for the office asset in 2013.

The 10 Spring Street building was purchased in 2013 for $91.64 million.

The office building was bought by Lendlease's Australian Prime Property Fund Commercial, Fairfax Media reported. Lendlease owns 8 Spring Street and its APPF trust and Abu Dhabi Investment Authority, the nearby 1 O'Connell Street.

The 10 Spring Street purchase would allow Lendlease to consolidate that block for a larger development over time.

The final sale price is an outstanding outcome for investors, reflecting a capital value rate per square metre of $19,477, Centuria said in a media release.

The record breaking price for the B-grade office sale in Sydney means Centuria’s investors’ equity investment tripled over the four years, it said.

The sale was handled by Simon Fenn, Graeme Russell and Ben Azar of Savills along with Josh Cullen and Rick Butler of INC RE.

Jason Huljich, CEO Unlisted Property Funds for Centuria, said he was unsurprised by the strong level of buyer interest.

“High quality properties in such an excellent location don’t often come onto the market, and 10 Spring Street has the advantage of appealing to a range of buyers,” said Huljich.

“We believed it would be attractive for purchasers looking to buy and hold the property, with a strong passing net income and the upside of fixed annual rental increases of around 4%. In addition, the weighted average lease expiry (WALE) is relatively short at around three years, offering the chance to capitalise on the strong demand for B-grade office space in the Sydney CBD when leases come up for renewal.”

According to the Property Council of Australia, the Sydney CBD is currently experiencing its lowest vacancy rates in close to a decade, and net effective rents in B grade offices have increased by 60% in 2016 alone.

The 1,505 sqm site has dual street frontages and will benefit from the new infrastructure and transport initiatives currently under construction.

“Prior to the sale, we worked with our architects on the redevelopment potential of the site and we were able to show interested buyers two broad indicative schemes. One involves redevelopment of the existing property, and a second envisages amalgamation with surrounding sites to create a significant mixed-use development,” Huljich said.

When Centuria bought the building, it was 20% vacant, but the fund was attracted to the property because of its prime location, in what is now a Strategic Site as identified in the City of Sydney Draft Planning Strategy 2016, providing the potential to construct a tower of up to 290 metres in height.

In addition, Centuria’s active management of the property, including a program of upgrades and investment, has seen record B-grade rents achieved of up to $1,200 psqm and the building becoming fully leased.

“10 Spring Street has been a spectacular performer for our investors since we purchased it in 2013, but the time is right for us to sell and to redirect the funds to other investment opportunities where we believe we can add more value in the future,” Huljich said.

Simon Fenn of Savills said “10 Spring Street attracted aggressive local and offshore capital looking to secure an asset that has the potential to be part of a rare super site in the future whilst also offering the immediate opportunity to capitalise on the strength of Sydney’s B grade leasing market.”


Sydney Cbd Office Sales

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