The Perth CBD office market looks set to benefit from a strong 17.9% increase in valuation at the Westralia Square office tower located 141 St Georges Terrace, Perth WA. Owners of the 19- storey office tower, GDI Property Group (ASX: GDI), recently announced an independent valuation of $255M at 30 June 2018, up from its acquisition price of $216.25M just eight months earlier in October 2017.
The valuation increase is likely to provide a kicker to the Perth CBD market, as it was driven by both a capital expenditure program as well as a 25-basis point tightening of the capitalisation rate from 7.25% to 7.00%. This should provide some good support for Perth in 2018, which has been struggling in recent years with current vacancies of 19.8% in the office market.
In addition, we estimate the valuation increase could add up to $0.07 per unit to GDI’s last reported net tangible assets per security of $1.12 in December 2017. GDI is also set to benefit from revaluations being undertaken on its GDI No 42 Trust, of which the listed entity owns 43.7%. The GDI No 42 Trust is currently marketing the government leased office at 223-237 Liverpool Rd, Ashfield NSW for sale, with sale proceeds likely to be included in FY19 results.