1 July 2014 — Impact Investment Group is set to sell Melbourne’s EPA building at 200 Victoria Street, Carlton for $42.3 million, in an off-market transaction that will yield a massive profit of almost $10 million on the purchase price struck in December last year when the building was only partly leased. It is also a premium of $5 million on the valuation when the building became fully leased.
IIG only acquired the A-grade office building in December 2013 for $33,550,000, with chief executive Chris Lock telling The Fifth Estate the market had undervalued the building and misread the demand for sustainable premises when it was sold to them.
The building, one of Melbourne’s most sustainable with 6 Star Green Star Office Design and As Built ratings and a 5 star NABERS rating, will be bought by Australian Unity Diversified Property Fund as part of a put and call option triggered for October.
When IIG purchased the property it had a vacancy rate of around 30 per cent, however in early 2014 Trinity College, part of the University of Melbourne, was secured on a 10-year lease for two floors and ground floor space commencing 1 June 2014.
The building is now fully occupied with a weighted average lease expiry of 8.6 years and around 96 per cent of income secured by major tenants Trinity and the Environmental Protection Authority.
IIG said it had expected to hold onto the building for around four years for its strong tax deferred cash yield but had been approached by DPF with an offer too good to refuse. Even following the lease to Trinity, a independent revaluation estimated the building to be worth $37,300,000 – so the sale adds an 11.8 per cent premium to this.
“The IIG Board resolved to grant the option to DPF on the basis that, if exercised, it will be at a significant premium to the independent valuation and the purchase price and will provide our investors with a strong return on their funds invested within the trust term,” Mr Lock said.
The EPA building is located in a prime spot on the edge of the Melbourne CBD, near the University of Melbourne’s Carlton campus and the Queen Victoria Markets. The property underwent a major refurbishment in 2009 to become one of Melbourne’s most environmentally sustainable office buildings, and features a trigeneration plant, atrium, rainwater harvesting, high-performance glazing and energy efficient lighting.
Settlement is expected late October 2014.
IIG is owned by Mr Lock and Small Giants, the family office of Daniel Almagor and Berry Liberman, developers of The Commons, a highly sustainable residential project in Brunswick. It has approximately $100 million in assets under management.
IIG describes itself as an active and ethical manager. Other investments include:
- In June 2013, IIG acquired 2 Johnson Street, Byron Bay, New South Wales for $5.25 million. The property is occupied as the national flagship store of Quiksilver Inc. including top floor cutting edge apartments with spectacular views over Byron Bay’s premier tourist beach. The property is subject to a ten year lease to Quiksilver Inc. IIG acquired the property with a strategy to achieve carbon neutral status within 12 months of acquisition.
- In July 2013 IIG acquired the Quiksilver Asia Pacific Distribution Centre in Geelong, Victoria for $13 million plus acquisition costs representing a net passing yield of 12.9 per cent a year. IIG is improving the environmental performance of the property is 50,180 sq m property.
- In July 2013 IIG financed the developer of the Gosford Private Hospital Medical Consulting Suites in Gosford, New South Wales. The project will feature over 2300 sq m of strata titled medical consulting suites adjacent to Gosford Private Hospital. IIG investors received an IRR in excess of 33 per cent.
- In February 2014 IIG acquired the global headquarters of Roy Morgan Research at 401 Collins Street, Melbourne Victoria for $32 million with a goal to substantially improve the landmark heritage building’s energy performance. The property is fully leased to Roy Morgan Research for 10 years on an initial net yield of 7.81 per cent.
- In June 2014 IIG invested $3.08m to part-fund construction of a new three-turbine wind farm in Chepstowe, Victoria generating energy for 4000 homes. The IIG Wind trust is currently open for investment to wholesale investors. Upon commissioning of the wind farm in April-May 2015, Hydro Tasmania has agreed to a 10-year Power Purchase Agreement to purchase all of the energy generated.