The Insurance Commission of Western Australia is moving out of direct property investment, placing an $800 million portfolio on the market that includes three CBD office buildings and two suburban shopping centres.
ICWA announced today a major restructuring of its portfolio, which totals $4.4 billion, with proceeds of the sale to be put towards indirect property investments and other asset classes.
“We are of a mind to maintain exposure to property but invest that indirectly,” ICWA chief executive Rod Withear said.
“The majority of the proceeds we would expect to allocate to the property asset class, but some may go to equities, fixed interest and other asset classes.”
The portfolio up for sale comprises the 31-storey Forrest Centre, the 13-level Westralia Plaza and the 19-storey Westralia Square, as well as The Shops at Ellenbrook and the Livingston Marketplace in Canning Vale.
ICWA said it would sell all the properties as an entire portfolio, or it would also considering selling the office and shopping centre assets as two respective groups.
Mr Withear said the assets had a collective book value of around $800 million, however he was expecting the sale to reap closer to $1 billion.
He said if that sale price was achieved, it would be the largest direct property sale in WA history.
It would also be a significant return on ICWA's investment, having bought the Forrest Centre in 1987 for $102 million and the Westralia Plaza site in 2004 for $5.5 million, at which it subsequently developed a $65 million office building.
ICWA initially paid $55 million for a 70 per cent stake in Westralia Square in 1989, securing the remaining 30 per cent stake in 1995 for $33 million.
The commission is also in the middle of a $30 million refurbishment of the Forrest Centre, to prepare the building for a new anchor tenant expected to be announced in coming months.
"They are good assets, they have provided good returns to the insurance commission over the decades that we’ve owned them," Mr Withear said.
He said there was significant redevelopment opportunity on two of the properties; a hotel development site at Westralia Square and The Shops at Ellenbrook subject to planning for a third stage of expansion.
"Those are investments that are not ones the insurance commission is electing to undertake," he said.
"One of the reasons that drove us to the point (of sale) were the property development opportunities, we’ve toyed with this hotel development for a few years, it’s just not a comfortable space for us as a government-owned insurer."
The assets are now on the market, with PwC Real Estate Advisory and HWL Ebsworth appointed as financial and legal advisory firms.
Mr Withear said he considered the timing to be right to sell the assets, with a lack of supply of major CBD commercial properties in the Perth market.
He said each of the CBD buildings had a strong leasing profile, with blue-chip tenants locked in on long-term leases.
The only other significant CBD asset available for sale is a 50 per cent stake in the Exchange Plaza, owned by Colonial First State Asset Management’s Private Property Syndicate, which is due to be wound up before the end of the financial year, as reported late last month by Business News.
“The leasing market is soft, but the capital markets are very strong,” Mr Withear said.
"The number of assets for sale in Australia is far lower than what the demand is, so it is a good time to take advantage of that increased demand, the drop in the Australian dollar, and the hunt for yield that investors are chasing globally.”