• Acquisition of The Lands Building, a fully refurbished, A-Grade office building located at 134 Macquarie Street, Hobart, Tasmania, Australia for a purchase price of A$57.5 million.

• 100% leased to the Tasmanian Government with a lease expiring in March 2031.

Terraplex Pty Ltd (AFSL No: 378434) is pleased to announce the acquisition of The Lands Building, an A-Grade office building, 100% leased to the Tasmanian Government. The Property has been purchased “off market” through a direct approach to the current owner with Scott Newton from Knight Frank Tasmania as intermediary.  The property will be owned through a newly established single asset fund which has been well supported by the Terraplex investor base.

The landmark “A” Grade office building was extensively refurbished in 2021 and is in the popular Hobart CBD government precinct.  The 10 storey, 11,675m² building has a 4.5 Star NABERS rating and is 100% leased to the Tasmanian Government with the current lease term through to 31 March 2031.

The agreed purchase price of the Property $57.5 million represents an initial property yield of 6.64% and at a building rate of $4,925/m².

Mr. Anthony Wilson, a Director at Terraplex, said “Terraplex has identified this property as a “core” investment opportunity forecast to deliver a “core plus” return profile.  This is represented by the strong income profile with a market rent review to occur on 1 July 2024 where we anticipate the rental rate will significantly increase. Terraplex manages two other funds with Tasmanian office properties and are very familiar with the market dynamics and market rental rates.  We believe that there is strong potential for market rental growth and that the purchase yield is significantly higher than what would have achieved as recently as 18 months ago.”

The new Fund has provided a compelling opportunity to invest in a refurbished “A” grade office tower in a strong Hobart CBD office precinct.

KEY ATTRIBUTES OF THE PROPERTY

The property is an extensively refurbished landmark office building with major works completed in 2021 and designed by award winning local architect Xsquared. The Lands Building has a 4.5 Star Green Star Rating.  The purchase price is estimated to be significantly below replacement cost, estimated to be more than $70 million, which excludes the value of the land.  The property is in the prime southern precinct of Hobart’s CBD.  The location is popular with Tasmanian Government occupiers given it is a 5 minute (400m) walk to State Parliament.

The lease provides for a market review on 1 July 2024 which should result in significant reversionary income uplift. The lease also includes fixed annual rental increases of 2.25% providing additional income growth over the medium to longer term.

According to the recent January 2024 PCA CBD Office Market Report, Hobart is the strongest capital city office market in the country with a CBD office vacancy rate of 2.8% against a national CBD average of 13.5%. With no new office market stock forecast to come online in the short to medium term and growing demand for Hobart office accommodation, this should see vacancy rates remaining very tight thus resulting in consistent rental growth.