Investa Office Fund has boosted its office exposure with the purchase of 6 O’Connell Street in Sydney for $134.95 million.
The fund’s manager Toby Phelps said the 25-storey office tower had a prime location in the heart of the Sydney CBD and easily subdivisible floorplates of about 600 square metres, which appealed to smaller office users attracted to the core location. The average net rents were $575 per square metre per annum.
Analysts said it was a positive move by the fund.
One said the sale price represented a 28 per cent valuation uplift on the building’s last sale price for the vendor, BlackRock. The building last sold in 2012, when it was purchased by Australian-founded private equity firm MGPA for $105 million.
Macquarie Equities analysts said that given the positive spread between the trust’s cost of debt and the initial yield, the transaction would be immediately earnings accretive to IOF. However, forecasts had already assumed a further $75 million of acquisitions on July 1.
Mr Phelps said: “This acquisition is consistent with IOF’s approach of seeking out acquisitions where we can leverage the demonstrated capability of the Investa Office platform. It deliberately provides IOF with exposure to Sydney’s smaller tenant market, which we believe is the most compelling segment of the market today and where IOF currently has no exposure.’’
