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Investa core office investment signals new fundraising round

The Sydney-based core real estate fund manager is preparing to tap the capital markets for another A$200 million on behalf of its Australia-focused open-ended fund after buying an office in Brisbane for A$173 million.

Investa Property Group is about to approach investors for a further A$200 million (€144 million; 192 million) for its open-ended property fund, Investa Commercial Property Fund (ICPF), after purchasing a 267,000-square-foot office building in Brisbane from London-based property company Grosvenor for A$173 million.

With a total of 12 office buildings now in its portfolio, ICPF has gone on the fundraising trail again. Over the next year, the unlisted real estate fund is targeting A$200 million from both domestic and international investors. Historically, about 25 percent of the fund’s LPs have been domiciled offshore, according to Peter Menegazzo, fund manager for ICPF

The purchase price for 259 Queen Street includes some leverage, but Investa is financing that leverage by recycling capital from some of its recent exits. The firm sold a central business district asset in Sydney last month and has another asset to sell in the next month, according to Menegazzo.

“The market at this point has good buying opportunities, and we can use our recycled capital to deleverage many of our previous deals,” Menegazzo told PERE. Although Investa as a group has done club deals before, most of ICPF's deals have been done alone, he added.

The firm would not disclose the exact leverage used for the Brisbane purchase, but Menegazzo revealed that after the transaction is completed, gearing for ICPF as a whole would be 26 percent. ICPF is an open-ended fund launched in 2003, and this most recent transaction will bring the fund’s assets under management to $2.1 billion, according to a firm statement.

The Brisbane office is currently 98.8 percent occupied and has an income yield of 8.5 percent, the statement said. Key tenants in the property include the Bank of Queensland, Commonwealth government and the Queensland State government.

This is the latest in a volley of investments for ICPF, including an A$231 million purchase of a 50 percent stake in a Sydney office building in February. As an open-ended fund, ICPF does not have a fixed investment term, but Menegazzo said he expected it to be invested in 259 Queen Street for more than 10 years, during which time he is hoping for a net IRR of 10 percent.

Investa Property Group has total of A$7.5 billion in assets under management. It invests in Australian offices from three major pools of capital: the company balance sheet, the listed Investa Office Fund and the unlisted ICPF, Menegazzo said.