75 George Street
75 George Street, Parramatta is a B-grade office building, located in the heart of the Parramatta CBD. At the time of acquisition, the property benefited from secure, medium term cash flows, with 70% of the space leased to St George Bank until 2017 and the remainder of the space occupied by a number of smaller tenants.
RF Corval acquired the property for a HNW trust in 2012 for $32.55m, which reflected a high initial yield and low rate per sqm. Whilst the property presented leasing risk in the medium term, RF Corval was confident in the prospects for the Parramatta office market and considered that the price represented value, particularly given the strong location and fundamentals of the property – large, 1,850 sqm floor plates, good natural light and high car parking ratio.
RF Corval’s strategy for this investment is focused on repositioning the building through targeted capex to assist in securing higher rents and retaining tenants or minimising downtime in the event tenants vacate. It also presents an opportunity to add value over the longer term by securing approvals to increase the lettable area by adding floors and infilling part of the floorplates.
RF Corval implemented a capital works program that enhanced the appearance of the property in a cost effective manner, focused on a refurbishment of the ground floor lobby, façade treatments and refurbishment of the bathrooms and on-floor areas. RF Corval also obtained development approval to add two light-weight floors to the existing structure.
As a result of these capital improvements, and the strong leasing demand that has emerged across Parramatta, RF Corval has been able to increase market rents for this property, with new leasing deals completed at rents well above historical levels. RF Corval has also maintained a close relationship with St George, the major tenant, and has recently agreed terms to extend this lease to 2020.
The HNW investors in this trust have benefited from annual income distributions of between 10% to 12% since acquisition and have also seen the valuation of the property increase by more than 50% since 2012, delivering investors with unrealised total returns well above the initial target that had been set for this investment.