Campbell Kwan | Australian Financial Review

Centuria has divested a Sydney CBD-fringe office for $103 million, which represents no discount to its book value, in an optimistic sign for an office market that has been battered by hybrid work.

Real estate investment firm Kurraba Group, which specialises in life science property, is the buyer of the office. The office, known as the Biomedical Building, is based in Sydney CBD-fringe technology hub South Eveleigh.

The Biomedical Building has sold $103 million, which was no discount to its book value.

The deal at book value is a departure from recent office sales, which have been divestments at discounted prices to account for office headwinds. Recent discounted deals included Singapore-based AEP Investment Management’s sale of a Brisbane CBD office at a 25 per cent discount and Mirvac’s sale of 255 George Street in Sydney for $364 million at around a 17 per cent discount.

Analysts in January predicted that office values could drop another 10 to 15 per cent this year before it fully washes through, potentially later this year.

But Kurraba Group chief executive Nick Smith said his purchase of the South Eveleigh asset was not an overpay as it was valuing the asset as a laboratory building due to its close proximity to universities, hospitals and medical companies.

“Laboratory buildings as an asset type have been running at book value or slightly sharper. We’re also anticipating precinct-type returns around the project, so it made sense for us,” Mr Smith said.

The deal was negotiated by Rebus Property’s Scott Timbrell. The asset was divested as the fund is set to close next year.

Centuria had originally acquired the building for $40 million in 2016 as part of a three-asset portfolio for the unlisted Centuria ATP Fund. Centuria acquired the portfolio for a collective $104 million. It had acquired the assets on a bet that South Eveleigh, previously known as an industrial area, would be gentrified and receive social and commercial infrastructure.

It has since divested two of the three assets for just over $120 million. The other divested asset, Bell Tower, was acquired by Centuria for $3.5 million and sold for $18.25 million. The sole asset remaining in the fund is the office for CSIRO’s Data 61 at 13 Garden Street, Eveleigh.

Centuria funds management head Jesse Curtis said the capital from selling those assets would be recycled into new funds, which he said have focused more on alternative assets as late. But he did not rule out Centuria potentially being active in office markets despite the sector’s headwinds.

“I think there’s potential you’ll see us active in office markets. We’re optimistic on the office sector, and one of the things to point out that we’re very optimistic on is population growth,” Mr Curtis said.

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