Australian Islamic investment fund Crescent Wealth has made its first foray into direct property investment, paying $30.75 million for a South Melbourne office building offloaded by Cromwell Property Group.
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The office building at 10-16 Dorcas Street, just off St Kilda Road, was held in Cromwell Property Trust 12, and was part of a portfolio Cromwell bought from the Alter family's Pacific Shopping Centres in August 2013.
The off-market deal was brokered Colliers International agents Rob Joyes and Leigh Melbourne. Crescent Wealth was represented by Darren Brusnahan, a director of boutique fund manager Freehold Investment Fund.
The sale price, at $4000 a square metre, reflected a 10.7 per cent premium to Cromwell's book value and a 20.4 per cent increase since its purchase.
Mr Brusnahan said a rent review would follow the building's settlement in August and he expected the yield to increase one basis point from the 7.3 per cent sale.
The eight-level 7608 square metre building was recently refurbished and is leased to technology company Dimension Data until August 2019. Dimension Data also rents the building across the street at 11-17 Dorcas Street.
"As St Kilda Road increasingly turns towards residential and healthcare conversion, we think there will be great demand for office assets in this area," Mr Brusnahan said.
Freehold manages Crescent's $30 million diversified property fund and acts as an adviser in direct property investments. The acquisition was funded by NAB's specialist corporate property division, which created a Sharia-compliant funding structure to enable the deal to go ahead.
Crescent, established in 2007 by Talal Yassine, Issam Eid and Samier Dandan, offers superannuation and managed fund investments that comply with Islamic principles. They do not invest in gaming or alcohol.
Crescent strategy and development director Omar Khan said: "This is the first of our direct acquisitions. Our diversified fund will be an investor in this building as well as some other investors."
The diversified property fund has returned 51.26 per cent since its inception in February 2013, Mr Khan said.
The deal brings the total value of city-fringe office deals to $170 million in the year to June 30, 2015 – slightly lower than the previous year's $191 million, according to Colliers International figures.
It frees up capital for Cromwell, which is the frontrunner in the race to buy the $9 billion Investa Property Group.
The Cromwell Property Trust 12's remaining properties include a distribution facility in South Australia leased to Rand Transport to 2033 and the Australian Tax Office building in Dandenong, which is under construction and due for completion in September.
Unitholders in the Cromwell trust will receive a one-off special distribution of 4.5¢ to be paid on July 10, bringing the total distributions for the year to 12.25¢.
