Strong support remains for Australian office markets, with some markets such as Sydney and Melbourne experiencing strong leasing and investment demand, said Mr Grant Nichols, fund manager for the Australian Unity Office Fund (AOF).
Speaking at the AOF’s first annual general meeting, Mr Nichols said Sydney and Melbourne and their associated metropolitan markets are performing particularly well, both from a leasing and investment perspective.
“This has positive implications for AOF, as 56 per cent of the portfolio is weighted to these markets.
“Vacancy rates in both Canberra and Brisbane appear to have stabilised, and both markets are experiencing improving net absorption and investor interest. Tenant demand remains tepid in Adelaide, but the market remains comparatively attractive from a price point perspective for both investment and accommodation.
“More broadly, investment demand in Australia remains very strong and it appears that current pricing levels will be sustained for at least the short to medium term,” Mr Nichols said.
At the AGM, AOF reaffirmed its first full quarterly distribution of 3.7 cents per unit which was paid on 14 October 2016.
Since listing on the 20th of June 2016, AOF has also completed approximately 4,400 sqm of leasing, with a further approximate 4,300 sqm subject to signed heads of agreement. Combined, this equates to nearly nine per cent of the portfolio over the last five months.
“AOF is well positioned to deliver on its specified objectives, given the leasing completed to date, prevailing market conditions and its strong lease expiry profile.” Mr Nichols said.
Peter Day, independent chairman of Australian Unity Investment Real Estate Limited, the Fund’s Responsible Entity, said that since listing the focus has been on delivering the objectives outlined in the offer document, in particular providing sustainable income returns for investors.
“The team has been actively seeking opportunities to help deliver sustainable and growing income returns for investors, by investing in quality Australian office assets in metropolitan and CBD markets.
“Our strategy is to maintain a portfolio diversified by geography, tenants and lease expiry profile through investments into existing properties or through acquisitions.
“The 2016 financial year delivered several highlights for AOF, including: leasing approximately 30 per cent of the portfolio; providing an average distribution yield of 8.6 per cent* for the year to 30 June 2016 based on AOF’s net asset value; achieving a $14.4 million valuation uplift compared to 30 June 2015; and successfully refinancing the $140 million debt facility via three and five year tranches.
“This is on top of the listing itself, which received strong unitholder support with over 99 per cent of existing unitholders who voted, voting in favour of resolutions to allow the listing to occur. We raised $152 million through an Initial Public Offering of units and reduced gearing to approximately 30 per cent,” Mr Day said.