Charter Hall Group Ltd has acquired the five-storey Fortescue House office complex in West Perth for $25 million from GE Real Estate.
Charter Hall Group Ltd has acquired the five-storey Fortescue House office complex in West Perth for $25 million from GE Real Estate.
The deal equates to a yield of approximately 8.25 per cent, due to the potential for strong upward rental reversions over the next three years.
GE only purchased the property at 50 Kings Park Road in July of last year for $16.9 million, representing a 48 per cent gain on its investment in 17 months.
With a net lettable area of 3,928 square metres, Fortescue House is fully leased by a number of national and international resource and engineering companies including Moly Mines.
Charter Hall executive director Cedric Fuchs said the landmark acquisition provided further tenant and sector diversity and exposure to the high growth Perth office market.
"DPF [Diversified Property Fund] is well placed to use its above industry norm average lease term of above eight years to exploit market reversion opportunities offered by properties like Kings Park Road without materially lowering the overall portfolio lease term metrics," he said.
Charter Hall joint managing director David Harrison said it had acquired yet another excellent asset off-market, this time with a $1.5 million discount to independent valuation.
Savills managing director Paul Craig and director of investment sales Miles Rowe, negotiated the transaction.
Mr Craig revealed that average passing office rents in the property were at $305/sqm net.
"Market rent for these buildings in West Perth is approaching $500/sqm and importantly, approximately 90 per cent of the office space will have the opportunity for a market review within the next 2 years, further reinforcing the strong income growth potential," he explained.
Savills noted the West Perth vacancy rate continued to decrease in the first half of 2007, registering 0.4 per cent in July 2007, the lowest vacancy rate recorded by the Property Council of Australia.
The $25 million transaction has simultaneously exchanged and settled, with the property being the thirteenth asset within Charter Halls' DPF, raising the fund's gross assets to approximately $188 million.
