Centennial has acquired a prominent 11-level office tower at 63 Pirie Street for $50.5m, on an equated yield of ~ 8.6 per cent.
While the sale of 63 Pirie Street is the largest CBD office transaction for the year to date, it is also Centennial’s largest office acquisition since the company was established in 2011.
The property investment manager and developer is acquiring the A-grade tower housing a swathe of blue-chip tenants from South Australia’s Raptis family, through a sales campaign by CBRE and Colliers.
Located on the high-profile junction of Gawler Place linking 63 Pirie Street to Rundle Mall, the Pirie Street precinct has undergone office upgrades and new developments, that have contributed to the area’s popularity as a commerce hub.
Centennial plans to support the precinct’s ongoing uplift through its own repositioning and upgrade strategy of 63 Pirie Street.
Centennial’s Head of Portfolio Management, Nick Lidonnici said the purchase of 63 Pirie Street was an opportunistic move, with the transaction representing a 16 per cent discount on a previously contracted sale price in 2022.
“Sustained high building costs across the country also factored into our decision to acquire the office tower given its replacement value would be more than double the $50.5m price tag.
“The building houses and has attracted high-quality tenants, across a diverse spectrum of industries with staggered leasing profiles representing an average WALE of 3.7 years.”
Currently 87 per cent leased across 11,329sq m of net lettable area, blue-chip tenants include Macquarie Group, Bentley’s, Cowell Clarke and global defence group, Lockheed Martin.
The building has also recently secured Tank Stream Labs which is currently completing an extensive fitout. Ground level tenants comprise retail, services and grab-and-go outlets, plus 34 car parks and end-of-trip facilities.
“There is significant embedded value in 63 Pirie Street given its 5-star NABERS rating and the building benefiting from a range of quality upgrades to tenancies and public spaces over the past few years, minimising the need for major capital expenditure works,” Mr Lidonnici said.
Centennial’s Joint Managing Director, Adrian Taylor said the group was entering Adelaide’s office sector at the right time on the ‘property clock’.
“Market indicators including Adelaide’s positive net absorption, improving occupancy, rents and values point to the early upswing stage of the office cycle, and further supported by South Australia’s healthy economy which has maintained two decades of uninterrupted growth,” Mr Taylor said.
“There is estimated to be $100bn of state-wide projects underway, in addition to the major contribution expected from the defence sector, buoyed by the AUKUS agreement and estimated to add a further $368bn to the state’s economy over the next 30 years.
“The amount of investment underway in the state will have positive reverberations into the office sector and together with South Australia’s pro-business sentiment including the state government’s attractive stamp duty exemptions, we expect more investment to flow into Adelaide’s office sector,” Mr Taylor said.
Paul Ford, Centennial’s Joint Managing Director added, “The building will be placed into a closed-end fund – Centennial Pirie Street Trust – following a $31m capital raising launched last week to our network of high-net-worth clients and wholesale investors.”
Centennial is heavily active in the mid-space urban and infill industrial and logistics sector, with investments valued at around $1.6bn including a ~3-ha industrial asset at Green Fields 18km north of Adelaide’s CBD.