WHY IS IT A GOOD DEAL?
Defensive Cashflow The income is 93% underwritten by the Queensland Government and the NYSE listed/Fortune 500 company Caterpillar Inc ($164 billion USD Market Capitalisation), with a WALE of 4.70 years providing security of income. Under Rented Short term rental income growth opportunity through the re-lease of the Pentacon tenancy which is currently leased at $287/sqm gross, 34% below the assessed market rent of $385/sqm. This reflects a rental shortfall of $15,850 per annum which is anticipated to improve the Property's net income position in Year 2. Unique in its market The modern office building, boasting a 5-star NABERS energy rating is currently one of the few premises in the Mackay CBD that meets government requirments. The building was constructed in 2008 and has recently undergone a $2 million upgrade. This refurbishment provided a high standard of office accommodation which is specialised to meet the long-term operational needs of the State Government. Tax Effective Cashflow Anticipated tax deferred component of income estimated at more than 50% (Year 1). Value Uplift Several opportunities exist to create value, most notably the Manager's proposal to expand the State Government occupancy and increase rents to market on renewal.
Counter cyclical We forecast 2024 to reflect the cyclical low in real estate investment as we reach peak cost of debt. Although other factors are at play, certainty in debt and equity markets will be a key catalyst to moving to a forecast expansionary phase in the cycle in FY25. The national office market experienced a positive shift in Q2 2024, with notable improvements in demand and rental growth across major cities. Investment activity has surged with $2.87 billion in office assets sold, the highest quarterly result in 18 months. (CBRE Australian Office Figures Q2 2024) Below Replacement Cost The Purchase Price reflects a 30% discount to replacement cost. In Mackay, the high cost of construction, low capital values, and the high cost of commercial fitouts, are currently limiting the construction and supply of new competing commercial property and/or the refurbishment of existing buildings to a comparable standard of accommodation and NABERS rating. To construct the same premises today, an economic rent exceeding $550/sqm gross would need to be achieved. This discount to replacement cost continues to drive market rents upwards for high quality offices with large floor plates in Mackay and also underscores the cost-efficiency of acquiring an existing property versus the construction of a new building.
Summary
Address
9 Tennyson Street, Mackay, QLD 4740
• Department of Children,
Youth Justice and Multicultural Affairs (Queensland Government) • Caterpillar Inc. (Fortune 500 / NYSE Listed $164 Billion USD Market Capitalisation) • Pentacon (Civil Engineering company with projects throughout Queensland)
T enant
Lettable Area
1,778 sqm
Site Area
2,008 sqm
Net Passing Income
$548,959 p.a.
Purchase Price
$6,625,000
WALE (by income)
4.70 years
Forecast Distribution (Year 1) Forecast Distribution (5 Year Average)
8.25% net p.a. (paid monthly)
8.65% net p.a. (paid monthly)
QUANTA TENNYSON STREET OFFICE TRUST | Information Memorandum
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