Investa Office Management Pty Ltd (‘Investa’) today announced the completion of a A$600 million capital raising and closed the first US Private Placement issuance of US$150 million for its flagship wholesale fund, Investa Commercial Property Fund (‘ICPF’ or the ‘Fund’).
Active capital management underwrites strategic acquisitions
ICPF has been an active buyer of quality office buildings over the past 18 months with recent acquisitions totalling around A$750 million, including a 75% interest in 420 George Street, Sydney and a further 50% interest in 1 Market Street, Sydney, taking ownership of this building to 100%. ICPF also acquired a 50% interest in 60 Martin Place, Sydney, with construction of this A$900 million, 40,000m2 Premium office redevelopment now underway and due for completion mid-2019.
Jason Leong, ICPF’s new Fund Manager, said: “We are delighted with the significant recent equity commitments by investors. It repositions the balance sheet following a series of quality acquisitions in a very tight market, ensuring ICPF is well placed to fund the redevelopment of 60 Martin Place.
The new investments are directly in line with strategy, complement our existing portfolio and increase our tactical weighting to the well positioned Sydney CBD office market. The fact that there was further equity demand that was unable to be accommodated is a strong endorsement of the Fund and the quality of the assets.”
A$1 billion in additional borrowings was secured from existing local and foreign lenders to complete the acquisitions. The A$600 million in new equity received from both new and existing, local and offshore investors, together with the proceeds from the US Private Placement issuance will be used to pay down borrowings, moving ICPF back into the low end of its targeted gearing range.
Chief Investment Officer, Peter Menegazzo said: “In recent years, ICPF has built up a strong track record of managing its capital position effectively by utilising its balance sheet capacity and attracting ongoing support from a list of blue chip institutional investors. This support has continued following the recent change in ownership of the Investa office management platform and is evidence of the ongoing demand for quality real estate and sector specialisation offered by Investa.”
ICPF’s A$4.1 billion prime office portfolio is arguably Australia’s highest quality portfolio, attracting more than A$2.2 billion in new equity since 2010.
Inaugural USPP finalised
This month ICPF also finalised its debut issuance into the US Private Placement market, issuing US$150 million of 12 and 15 year notes, with US$75 million issued for each tenor. A competitive margin of US Treasury Rate (‘T’) +175 basis points for the 12 year and T+190 basis points for the 15 year was achieved.
Jason Leong said: “This issuance is part of the Fund’s broader debt strategy which is to diversify sources and maturity of borrowings and extend our overall debt maturity profile in a cost effective manner, which has been achieved with our inaugural USPP issuance.
The strong response from investors to the issuance highlights the international appeal of high quality, prime grade Australian office real estate, long weighted average lease expiry profiles and Investa’s favourable track record in operations, leasing and capital management.
The all in pricing of debt was very competitive for 12 and 15 year terms, and the proceeds were used to refinance existing bank borrowings,” said Mr Leong.
ICPF is rated A- by Standard & Poor’s. National Australia Bank was the Sole Lead Agent for the US Private Placement Transaction.
Office market conditions remain strong
Investa sees market conditions continuing to strengthen in the Sydney office market as vacancy tightens and the withdrawal activity of existing buildings gathers momentum, resulting in a reduction in incentives and delivering double digit effective rental growth over the last 12 months. With the supply pipeline constrained, Investa believes these conditions are set to further strengthen in the medium term.