Chasing yields of 8 to 10%, property syndicate investors seek Perth offices

Chasing yielding in the range of 8 to 10%, property syndicates have emerged as the dominant player in WA’s commercial property market in 2012.

They are accounting for more than half of all major commercial sales and continuing to look for opportunities, according to Knight Frank.

The company recently sold 1 Adelaide Terrace (pictured below), which is being syndicated by GDI Property Group for $102.55 million. It sits adjacent to the 40-hectare urban renewal project called Riverside that will extend Perth's CBD grid down to the waters edge. The property fund manager GDI launched the unlisted GDI No 36 Perth CBD Office Trust earlier this month seeking to raise $65 million of equity.

GDI suggested its purchase of $102.55 million from Fortius Funds Management reflected a yield of more than 10%.

The 1 Adelaide Terrace property is an A-grade office building totalling 19,825 square metres that was when offered earlier this year 95% leased to five blue-chip office tenants, including the WA government and ASX-listed companies.

The award-winning seven-storey building formerly the headquarters of Woodside was built with large floor plates ranging from approximately 2,500 to 3,000 square metres.

The building has an extensive curved glazed façade with views across landscaped parklands to the Swan River.

The prominent location will be further enhanced with completion of the Frasers suites development directly opposite and the proposed Waterbank project.

It followed on from other significant syndicator purchases of 255-267 St Georges, which sold for $26.7 million.

Another syndication came at 251 St Georges Terrace, which sold for $61.3 million.

Knight Frank managing director John Corbett says syndicates have always been active in the Perth market, but in 2012 they have become the truly dominant player across both the commercial and industrial sectors.

He says while individual developers and private investors struggled to obtain financing in the current market, syndicates are able to bring together a myriad cashed-up smaller investors to secure larger properties.

“The market is working in the favour of syndicators like GDI and Primewest, who have established track records and have excellent data bases of potential investors,” Corbett says.

“Many smaller investors are being frustrated by the lack of quality properties in the $1 million to $5 million range, so the option of being part of a larger purchase is quite appealing.”

“At the same time the traditional competitors for the larger properties are being restricted by issues like flexibility and bank financing.”

Corbett says small investors are also able to secure better yields as part of a syndication, with yields in the range of 8-9% currently being achieved.

“It is still very much a buyers' market, and the syndicators are making hay while the sun shines,” Corbett says.

“The large super funds and other investors will soon be getting more aggressive with their strategies, but for now the syndicators are cherry-picking the best deals.”