Centuria Office Fund divests 555 Coronation Drive to Exceed Capital

In a significant move within the Australian office market, Centuria Office, the country’s largest listed pure-play office fund, has exchanged unconditional contracts with Brisbane-based fund manager Exceed Capital for the sale of 555 Coronation Drive, Toowong.

This transaction, which is consistent with the asset’s December 31, 2023, book value, underscores the strong investment appetite for smaller, well-located metropolitan offices with robust leasing and sustainability credentials.

GALLERY  

The three-storey building, opened in 1989, offers two levels of basement parking and office spaces ranging from 1,622 to 1,983 square metres, totalling a net lettable area of 5,568 square metres. Significant refurbishments in 2020 enhanced the building’s appeal with a new foyer, lifts, bathrooms, and end-of-trip facilities. It now boasts a 3.4-year Weighted Average Lease Expiry (WALE), a 5.5-star NABERS energy rating, and a 4.5-star NABERS water rating, highlighting its sustainability credentials.

Belinda Cheung, Fund Manager for Centuria Office Fund, stated that the fund had divested four metropolitan office assets either at or close to their book values this financial year. “These have been assets where the REIT has extracted value through a series of refurbishments and measures to improve amenity and sustainability efficiencies,” Cheung explained. “The value-add strategies have resulted in strong leasing and occupancy for the assets, which in turn has generated comparably strong investment demand.”

Cheung noted that the Toowong divestment aligns with the REIT’s strategic focus on improving portfolio assets by age and quality. She highlighted that most of Australia’s office transactions in the past 18 months have involved smaller scale assets below the $100-million threshold, indicating strong market demand for such properties.

The sale of 555 Coronation Drive is part of a broader strategy that has seen Centuria divest $139 million of non-core office assets this financial year, including properties in Canberra, Robina, and Keswick. The proceeds from these sales are intended to repay debt, as noted by Colliers.

Cheung also cited positive mid-term market trends, including population growth and decreasing supply of new office developments. “Looking forward, development feasibilities have been impaired due to rising construction costs, increased finance costs, and softening capital market transactions, pushing economic rents significantly above prevailing rents in the majority of Australian office markets, especially those COF is exposed to,” she said. She projected that Australia’s growing workforce, particularly in white-collar sectors, could drive demand for up to 7 million square metres of additional office space by 2033.

The agents for Centuria in the 555 Coronation Drive transaction were Knight Frank’s Justin Bond and Blake Goddard, and CBRE’s Jack Morrison and Adelaide O’Brien.

Images via The Urban Developer

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