Warrington Property Group has unveiled the biggest completed transaction in Perth's commercial property market this year, buying the Australian Taxation Office building in Northbridge for $101 million in a partnership with global investment giant Goldman Sachs.
The building was listed on the market in April this year, with industry sources at the time suggesting it could fetch up to $130 million.
But the building's vendor, German financier DekaBank, wasn’t able to secure a deal at that price, with the transaction struck at an initial yield of 12.11 per cent.
That yield reflects the need for a $16.5 million upgrade of the building, which is part of a 10-year lease deal with the ATO signed last year.
The transaction was brokered by CBRE’s Mark Hansen, Rick Butler and Andrew Woodley-Page.
Warrington Property Group founding partner Chris Weaver said the purchase was a show of faith in the Perth office market’s long-term fundamentals.
“We are acutely aware of the recent downturn in the Perth office market; however, with a well-documented refurbishment plan as a condition of the ATO lease, and over nine years remaining of high-yielding Commonwealth government income, this investment represents perfect counter-cyclical buying with significant downside protection,” Mr Weaver said.
Perth-based Warrington now has $445 million in assets under management, including the Melbourne International Airfreight Centre and 70 Lower Gibbes Street in Chatswood.
The ATO building is the third acquisition for Warrington’s Property Value Add Trust, which was launched in June with an initial target equity raising of $50 million.
The trust has the capacity to raise a further $65 million, with Mr Weaver expecting its asset value to be capped at around $150 million.
Mr Weaver said the deal with Goldman Sachs was in line with the strategy Warrington had put in place for the trust.
“The trust was launched to hold sufficient capital to seek out interesting opportunities in its own right, but incorporate a flexible structure that enables significant co-investment from like-minded institutional investors to make larger investments that fit Warrington’s criteria,” he said.
The deal is the largest office building transaction to be finalised in Perth for 2015, however a half stake in the Exchange Tower is reportedly subject to a $120 million sale to a fund managed by Morgan Stanley, but that deal is not yet complete.
The only other major sale in 2015 was the Monadelphous building in Victoria Park, which sold for $72.8 million.
Business News understands the ConocoPhillips building in West Perth will be the next major sale to be announced, with a transaction on that property expected in coming weeks.
Other assets on the market include Westralia Square, Westralia Plaza and the Forrest Centre, all owned by the Insurance Commission of Western Australia, as well as WorleyParsons’ old headquarters at 1 Adelaide Terrace.
