Investa Office Fund (“IOF”) announces it has entered into a contract to acquire 50% of The Piccadilly Complex, Sydney (“Piccadilly”), for $194.25 illion, subject to adjustments for lease incentives. As a result of the acquisition, FY14 FFO guidance provided at the 1H14 results announcement is being upgraded by 0.2 cents per unit to 26.3 cents per unit, representing 5% growth on FY13.
Piccadilly is comprised of two office buildings totalling ~42,000sqm located on Pitt and Castlereagh Streets, connected by a two level retail mall and serviced by a 229 bay car park. The complex as a long weighted average lease expiry of 5.3 years, 93% occupancy and attractive net office rents ranging from ~$350psm to ~$690psm, with annual fixed increases. The asset is highly complementary to IOF’s existing Sydney portfolio in terms of location, income profile and rental price point. Value-add opportunities exist in the short-term through the lease-up of vacant space and the opportunity to capture rental upside.
The surrounding area has recently undergone significant improvement with the development of 161 Castlereagh Street, home to ANZ and Freehills, and the upgrade of Pitt Street Mall. Longer term opportunities exist to make more of this strategic location.