Prime Adelaide tower tops $100m

An Adelaide office tower sold for more than $100 million was one of the year’s major deals.

A new venture between property executive Chris Lock and investment house Wingate has bought an Adelaide office tower for about $103.5 million in a sign of demand for assets in South Australia.

The pair swooped on the Department of Planning, Transport and Infrastructure head office in the Adelaide CBD that was sold by German group Real I.S.

The tower at 77 Grenfell St was picked up by the German manager for about $90 million in 2011.

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The A-grade office building drew strong bidding and last year had interest from Singaporean trust Soilbuild REIT.

The 20-level office tower is more than 96% occupied by the state government, providing a weighted average lease expiry of 5.1 years and fixed-­income growth to the end of 2021.

The complex has been significantly refurbished throughout the past decade and the new owners will face minimal capital expenditure.

There has been a run of big sales in Adelaide’s prime CBD office market, with buyers chasing yields tracking between 150 and 200 basis points higher than Melbourne and Sydney.

The Grenfell St tower showed a yield of about 8.6% and is about 99% occupied.

It will spin off about $9 million in income annually once fully leased and observers say the sale should be assessed on its rate per sqm of about $6500.

The tower has 15,888sqm of office space and 596sqm of ground floor retail, with basement parking for 37 cars. CBRE’s Ian Thomas, Alistair Laycock and Thomas Gnieser and Colliers International’s Paul van Reesema and Alistair Mackie brokered the deal.

CBRE’s Thomas says interest received during the sale campaign highlights the strengthening investment appeal of Adelaide’s office market.

“It became evident during the sale process that the buyer profile for Adelaide assets has expanded since 2017, with an increase in interest from the eastern seaboard — particularly Melbourne.

“As yields continue to be driven lower in other capital cities, more groups are looking to Adelaide for a greater return with less volatility,” Thomas says.

Colliers International’s Paul van Reesema says the Adelaide office market’s improving fundamentals are underpinning investor interest.

“Adelaide has hit an all-time high in 2018 in terms of both the number of major office sales and the aggregate value of transactions of investment, with 10 towers settling for more than $880 million and an additional three towers marketed for sale in the fourth quarter of the year,” van Reesema says.

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