Growthpoint (ASX:GOZ) buys government office in Dandenong for AU$165M

Highlights

• Growthpoint Properties Australia has exchanged contracts to buy Government Service Office (GSO) in Dandenong for AU$165 million.
• The share price of Growthpoint Properties Australia was spotted trading 1.554% higher at AU$3.920 per share on ASX at 3:23 PM AEST.

The share price of Growthpoint Properties Australia (ASX:GOZ) grabbed the attention of investors today (30 May) after the company revealed that it has exchanged contracts with Dandenong GSB Pty Ltd to purchase Government Service Office (GSO) in Dandenong for AU$165 million. Growthpoint Properties' shares traded 1.554% higher at AU$3.920 per share on ASX at 3:23 PM AEST.

The Government Service Office (GSO) in Dandenong is an A-grade modern office asset situated at 165-169 Thomas Street, Dandenong, Victoria. 

Growthpoint Properties Australia is an ASX-listed real estate investment trust (REIT) with a market capitalisation of AU$2.97 billion. The shares of Growthpoint Properties Australia have gained 1.69% in the last one year, while the stock is down 11.63% year-to-date (YTD). 

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The contract of sale is subject to Foreign Investment Review Board (FIRB) approval. The company is anticipating settlement in the coming weeks, subject to certain conditions. As per the company, the funding of the acquisition will be done using debt, and the purchase is expected to be accretive to FY23 FFO. Post settlement, Growthpoint anticipates having nearly AU$184 million of undrawn debt facilities and a gearing of approximately 33.9%. 

Last month, Growthpoint reaffirmed its earlier guidance of FY22 FFO of 27.0 cents per security, representing a minimum of 5.1% growth on FY21, and FY22 distribution guidance of 20.8 cents per share, up 4% on FY21.

Image Source: © Dudau | Megapixl.com

 More details about the asset:

The asset is well placed for transport and retail amenities and is around 400 metres away from the Dandenong railway station and Dandenong Plaza. Dandenong has recently benefited from AU$700 million in urban renewal investment. The asset is 99.7% occupied, including 96.8% leased to the Victorian State Government on behalf of the Minister for Finance, with a long weighted average lease expiry (WALE) of 9.5 years, as of 1 June 2022. 

The Victorian State Government lease provides stable annual 3.5% rent reviews.

The leftover space is leased to 8 ground-floor retail companies. The property is being acquired on a 5.3% initial income yield.

The company believes that the acquisition will further increase Growthpoint's exposure to government covenants in strategic urban locations.

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