The AFR – Wingate/IPG buys Real I.S.'s Adelaide office tower for $104 million

Su-Lin Tan 

Melbourne-based investment firm Wingate/IPG has scooped up the A-grade office tower at 77 Grenfell Street in the Adelaide CBD for $103.5 million at an initial passing yield of around 8.4 per cent, after a year on the market.

The property, which was purchased from German asset management group Real I.S., settled on Monday.

The 15,888-square-metre tower is mainly leased to anchor tenant, the South Australian government's Department of Planning, Transport and Infrastructure, at a weighted average lease expiry of 5.1 years.

The Department of Planning, Transport and Infrastructure headquarters in the heart of Adelaide's CBD has sold.

The lease will end in 2021, with options.

The 20-level tower also has 596sq m of ground floor retail space and basement parking for 37 cars, also mostly leased to the South Australian Government.

CBRE's Ian Thomas said the competitive interest received during the sale campaign highlighted the appeal of Adelaide's office market.

“It became evident during the sale process that the buyer profile for Adelaide assets has expanded since 2017, with an increase in interest from the eastern seaboard – particularly Melbourne,” Mr Thomas said.

“As yields continue to be driven lower in other capital cities, more groups are looking to Adelaide for a greater return with less volatility.”

The property has scope to earn a fully-leased yield of 8.7 per cent.

Mr Thomas brokered the sale with Alistair Laycock and Thomas Gnieser, as well as Colliers International's Paul van Reesema and Alistair Mackie.

The removal of stamp duty in South Australia in July this year was pivotal to attracting strong interest in the property and would continue to make commercial property in the state more competitive, agents said.

Stamp duty on non-residential and non-primary-production real property transfers, previously levied at up to 5.5 per cent, no longer applies.

“The abolishment of the stamp duty was positively received due to its impact on the initial yield and also the potential for South Australia to be a trading market without the significant impost of stamp duty payable in the other capital city markets,” Mr Thomas added.