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Quintessential seeds new fund with Adelaide CBD buy from Con Makris

AUSTRALIAN FINANCIAL REVIEW
Nick Lenaghan
9 December, 2018

Property investment house Quintessential Equity will seed a recently launched fund with an Adelaide CBD building bought from Financial Review Rich Lister Con Makris for $43.1 million.

The office tower at 431 King William Street will be the first asset in the $112 million Master Fund which the Melbourne-based fund manager raised earlier this as a blind fund.

The deal, brokered by Colliers International’s Paul Van-Reesema, was struck on a 10.5 per cent yield.

Quintessential will move swiftly to undertake an extensive refurbishment of the 28-year-old building with the aim of lifting its current three-star NABERS base building energy rating to 4.5 stars.

There is plenty of upside potential in the yield, with around 30 per cent of the 11,866-square-metre building vacant.

“Adelaide has been a tough market over the past few years with the decline of the car manufacturing industry, but now it’s showing real potential,” said executive chairman Shane Quinn

“What we believe to be the impending resurgence of the Adelaide office leasing market is underpinned by rising business confidence and consumer sentiment as a result of steady economic growth and falling unemployment.

“At the same time, future supply of office space within Adelaide’s CBD is below the long-term average and expected to remain that way in the short term, so we expect to see the CBD vacancy rate continue to decline over that period.”

The move on the Makris tower is typical of the Quintessential strategy of seizing on assets that can be reworked in under-loved or overlooked markets.

The Master Fund was set up for that just such a purpose in a market where credit is tightening for commercial property, allowing Quintessential to move quickly for vendors who want to sell.

In September last year Quintessential bought a Barton office block in Canberra for $16.5 million from the Motor Trades Association of Australia, an asset that was 40 per cent vacant.

In June last year it secured a windfall for its high-net worth investors after selling a Canberra office building for $58.4 million to Asian investors, having paid $14 million for it five years earlier.

For Mr Makris, the King William Street sale follows his decision in late 2016 to shift his headquarters to Queensland after 45 years in Adelaide.

Since then he has sold the Le Cornu development site in affluent North Adelaide to Adelaide City Council. In 2016, he also attempted to sell the $120 million City Cross Shopping Centre on Rundle Mall.

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