Boutique fund manager Quintessential Equity has offloaded a premium-grade office tower in central Canberra for $41 million.
The property, at 39 Brisbane Avenue in Barton, was purchased by IOOF Investment Services Limited, which is part of the Insignia Financial Group of companies.
Situated in the Parliamentary Precinct, next to Parliament House, the 4800sq m property features three levels of office above a ground floor and podium car park.
The office block is fully leased to a diverse list of quality tenants including BAE Systems and Spirit Super, with a net passing income of more than $2 million and a weighted average lease expiry of six years.
The deal was brokered by Colliers International and JLL, reflecting a gross sale yield of 5.3 per cent.
Quintessential Equity chief executive Russell Bullen said the quality of the building reflected millions spent in upgrades, which had allowed the fund manager to achieve its goal of securing long-term, stable income from high quality tenants.
“Canberra is one of the highest performing office markets in the country with very strong forward-looking prospects,” Bullen said.
“We are very pleased with the outcome of the sale.”
Quintessential Equity originally purchased the property for $16.5 million from the Motor Trades Association of Australia in 2017 and recently undertook a complete refurbishment of the building to regenerate it both aesthetically and mechanically.
Investors have been strongly competing for Canberra office buildings, particularly those with extended leases to the Commonwealth or ACT government, which are selling on yields of about 5 per cent.
Insignia Financial head of property Simon Gross said the newly acquired asset would help generate a reliable and consistent income stream for investors.
“[The asset] will capitalise on market value appreciation over the long term … this transaction was an ideal fit for our well established and highly successful AM Property Plus fund,” Gross said.
“Additionally, by identifying the growing demand for quality assets, the property sees us further diversify our portfolio into the ACT office development sector, in a prime location near Parliament House in central Canberra, one of the strongest and most stable office markets in Australia.”
According to new report from commercial agency JLL, the Canberra office market recorded a fourth successive quarter of positive net absorption in the three months to March 31, virtually all of it prime grade space.
Canberra’s office sector vacancy rate fell to 5.5 per cent, compared with the national average of 13.5 per cent.
The prime vacancy rate in Canberra contracted 0.8 percentage points to reach 2.8 per cent, Australia’s lowest.
Prime net effective rents rose 0.6 per cent, while secondary net effective rents increased 1.2 per cent.
“Barton [in particular] is a tightly held market, so these types of opportunities are few and far between,” JLL Canberra managing director Tim Mutton said.
“The building was extremely well presented with all the fundamentals in place, including a prime location, quality income stream and a large site, which is why it was so highly contested.”
