Mount Gravatt ATO office changes hands for $57m
LaSalle Investment Management has fought off local and international investors to land an ATO-leased office complex in Upper Mount Gravatt for $57 million.
The deal, negotiation by Tom Barr and Don Mackenzie of Colliers International, represents an initial passing yield of just over 8%.
The Commonwealth Government Building, located at 28 Macgregor St at Mount Gravatt, south of Brisbane, was purpose-built for the ATO in 1992.
The Commonwealth of Australia, through the Australian Tax Office, occupies 99.9% of the building on an 8.5-year term with a five-year option that commenced in July, 2012.
Barr, Colliers’ national director of capital markets investment services, says government leases continue to be prized among investors.
They were attracted to 28 Macgregor St for its strong tenant covenant, future development potential, and high profile position in a growth precinct that is surrounded by significant public amenity and infrastructure
“Government leased assets of scale – local, state and Commonwealth – across the country are very favourable to institutional investors, particularly in the present economic environment. This asset was no different,” he says.
“Recently we have seen many government-leased assets trade across Australia, and we expect strong interest in these assets to continue in 2016.”
Barr says the building received attention from both domestic and offshore institutions and some of the larger syndicators.
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He says half of the bids received were from offshore groups or were offshore groups with domestic-managed investment trust representation.
“This is in keeping with the broader trend evident throughout 2015, where nationally we saw offshore capital increasingly partnering with domestic institutions because of their knowledge and expertise in Australian commercial property,” he says.
“LaSalle Investment Management was seeking value-add and opportunistic assets for one of their Asian funds, achieving higher risk – higher return.”
Recently we have seen many government-leased assets trade across Australia, and we expect strong interest in these assets to continue in 2016
“They were attracted to 28 Macgregor St for its strong tenant covenant, future development potential, and high profile position in a growth precinct that is surrounded by significant public amenity and infrastructure.”
The property is a fully leased, six-level, A-grade office building with a total net lettable area of 14,286sqm and 401 car parking bays.
The building has recently undergone a major refurbishment and modernisation program, as well as mechanical services upgrade, achieving a 4.5-star National Australian Built Environment Rating System (NABERS) energy rating.
“The asset also provides competitive operating costs due to modern services, as well as depreciation benefits, increasing the tax effective return of the investment,” Mackenzie says.