Investec Australia Property Fund buys New Zealand office in expansion drive
The fund’s management says the spread between prime-grade office yields in Wellington and key Australian CBD office markets is currently attractive
Investec Australia Property Fund (IAPF) has acquired a prime office for R1.2bn in Wellington as it expands into New Zealand for the first time and diversifies its asset base.
"IAPF is pleased to advise unit-holders that it has entered into a contract for sale with Kiwi Property Holdings Limited to acquire a prime grade office property known as The Majestic Centre … in Wellington, New Zealand.…."
The seller is a wholly owned subsidiary of New Zealand Stock Exchange-listed Kiwi Property Group.
The purchase price equates to an initial yield of 7.1%, pre transaction costs, with the potential to increase this yield to 7.3% on a fully leased basis. The purchase price plus all transaction costs will be funded via the fund’s existing syndicated debt facility with Westpac and ANZ, at an expected all-in funding cost of 4.1% per year.
"The property is the fund’s first investment into New Zealand and demonstrates management’s commitment to seeking out opportunities that represent relative value," CEO Graeme Katz said.
"Management believes that the spread between prime-grade office yields in Wellington and key Australian CBD office markets is currently attractive, particularly given recent firming of capitalisation rates in Australia."
"Like Australia, New Zealand offers the fund the opportunity to invest in a sophisticated and transparent property market underpinned by strong macroeconomic fundamentals such as consistent GDP growth rates of between 2.0% and 3.5% over the last five years, low unemployment rates of 4.5%, low interest rates and a diversified economy," Katz said.
"From a property perspective, unlike Australia, there is no stamp duty payable in New Zealand on the acquisition of property, which is typically 5.5% of the purchase price in Australia, and there is no capital gains tax on divestment of property held for passive investment," he said.
The effective date of the acquisition of the property is the settlement date under the contract for sale, which is scheduled for December 11 2017.