Investec likes Sydney office property with $160m spend
South African-listed Investec Australia Property Fund (IAPF) has acquired two Sydney office properties for $160 million and will raise funds for the deal via a renounceable rights issue.
The properties include 2 Richardson Road, North Ryde, which was purchased for $85 million, and 20 and 24 Rodborough Road, Frenchs Forest, purchased for $75 million. Each deal was transacted on yields of 7 per cent and 7.5 per cent respectively.
IAPF chief executive Graeme Katz said the acquisitions were attractive in that they increased Investec’s exposure to Australia’s largest and best performing economy of NSW.
“The acquisitions continue the fund’s focus of investing in established metropolitan office markets where we see value relative to the major CBD office markets,” Mr Katz said.
“We are starting to see rental growth in most of Sydney’s office markets and as such, precincts such as North Ryde and Frenchs Forest, which both have comparably favourable net face rents to other Sydney metropolitan office markets, will only become more attractive to cost-conscious occupiers.”
The properties secure medium-term income for the fund, with a weighted average lease expiry of at least 4.1 years.
Mr Katz said the buildings have low vacancy rates, are occupied by quality tenants, and are ideally located to benefit from rezoning initiatives and surrounding infrastructure developments.
The acquisitions will be partially funded by way of a ZAR1.53 billion (A$153 million) renounceable rights offer which will ensure that the fund’s gearing will remain within or below its target range of 35 per cent to 40 per cent following the acquisition.
The rights offer issue price of ZAR13.50 (A$1.32) represents a forward yield of 7.6 per cent before withholding tax on the theoretical ex-rights price.
The fund has already received underwriting commitments to the value of 67.2 per cent from unitholders.
The property at North Ryde is a four-level, A-grade office building located 10 kilometres north-west of the Sydney CBD. It was built in 2004 and comprises 15,055 square metres of office space, 150 square metres of ground floor retail space and 492 undercover and on-grade car parks.
The Frenchs Forest property comprises two separate buildings, 20 Rodborough Road and 24 Rodborough Road. The 20 Rodborough Road property is a campus-style office building providing 12,366 square metres of office space. The building has recently undergone an extensive refurbishment program costing $1.3 million. The 24 Rodborough Road property is a modern office and warehouse facility with two levels of office space totaling 3219 square metres and one level of high-clearance warehouse space.
