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Castlerock raising $90 million to fund Queensland Government leased Icon

•2-Castlerock

Castlerock, a full-service property group specialising in buying and managing Commonwealth and State Government tenanted buildings is set to expand its asset base following its latest purchase.

The group has made the largest acquisition in their 18-year history, purchasing the Icon building located in Ipswich’s CBD for $145.2 million.

The purchase will be settled in the group’s long standing Auslink Property Trust No. 2, taking assets under management to just under $500 million. The purchase is being made from the Cromwell Property Group’s whose Ipswich City Heart trust is being wound up after reaching its maturity.

The acquisition is Castlerock’s largest in their 18-year history, coming with a price tag of $145.2 million. This acquisition takes Castlerock’s funds under management (FUM) in its Auslink Property Trust No. 2 to nearly $500 million. The property is being purchased from the Cromwell Property Group with the winding up of the Cromwell Ipswich City Heart Trust.

Castlerock, a multi-generational business, has built out a niche as trusted advisor to government by helping them achieve fit-for-purpose buildings tailored to their needs and has more than 35 government-leased properties in its portfolio in regional and suburban locations.

Commenting on the deal, Castlerock Director Adam Bronts says: “This acquisition reflects another significant step forward for Castlerock, adding to our successful acquisition in September 2020 of the $57 million Wollongong ATO Building.

“We believe this acquisition is an exceptional opportunity for both our existing and new unitholders, with the Ipswich property meeting all the fund’s specific criteria.”

The nine-storey, 17,870 square metre building (17,080 office/790 retail), situated in Ipswich’s Brisbane Street, has the Queensland State Government as its major tenant, accounting for more than 91 per cent of the net lettable area. Its 15-year lease expires in September 2028.

Bronts says: “Acquisitions of this quality demonstrate we are continuing our strategy of buying high quality assets tenanted by governments and located in areas that are being revitalised by state and private investment.

“This acquisition also builds on the strong relationship we have with the Queensland Government, where they have been excellent tenants in our buildings located in Townsville and Mackay. By managing this building inhouse, we will ensure our relationship with the Government remains rock solid.

“On the investment front, this acquisition both grows and diversifies the assets in the Auslink Property Trust No. 2”. The fund is estimated to yield an investment return of 7.2 per cent over the next 12 months, with a historical IRR performance to date of the trust of 12.5 per cent p.a. Queensland State Chief Executive Simon Beirne of the real estate firm Colliers, which handled the sale, says: “We congratulate Cromwell and Castlerock on this transaction. Cromwell had the foresight to commit to Icon while it was under construction as Stage 1 of the regeneration of the Ipswich CBD and the investment has performed well during their ownership.

“Colliers are privileged to have introduced Castlerock to this opportunity, the third major office asset we’ve sold the group since 2019.”

Colliers’ Queensland Director for Investment Services and Office Middle Markets team lead Samuel Biggins says: “Castlerock’s investment is testament to the continuing growth prospects of the Ipswich area and symbolic of the broader trend of interstate capital moving into office assets in key regional markets in Queensland.”

Castlerock will be raising $90 million from investors, new and existing, to fund the purchase from 1 July 2021.

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