AMP wholesale fund buys Sacramento office building for $32.7 million

An active buyer and seller of US real estate, AMP Capital Global Direct Property Fund, has paid US$29.4 million (A$32.7 million) for a CBD office tower in Sacramento, California.

The purchase is a nice fit for the fund which is this year focusing on ‘’top tier secondary markets poised for growth that are only just beginning to attract significant capital flows’’.

The building (pictured below) is walking distance from the California State Capitol building at 770 L Street. The 13-level, Class A office building of more than 15,600 square metres has a strong government and lobbyist tenancy profile.

It has excellent green credentials, being one of only six non-owner-user buildings awarded LEED Gold certification in the CBD.

AMP Capital Global Direct property fund manager Tim Fallet said the property was attractively priced with the opportunity to add value.

“The Sacramento office deal is a high-quality property acquired well below average comparable sales over the past 10 years with some of the best vacant space in the market.

‘’We plan to offer prospective tenants attractive lease rates, providing a competitive advantage over landlords with a higher cost basis.

“Secondary office markets like Sacramento are poised for growth, driven by strengthening economies.

‘’We want to position ourselves ahead of the capital flows, de-risk the asset by capturing a good share of leasing activity to achieve a stabilised 90-95% occupancy profile and resell into a rising market to an investor hungry for core investments.’’

Mr Fallet says Australian real estate is in high demand. ‘’There’s a lot of domestic and international capital chasing local property, but the Aussie market isn’t big enough to absorb these capital spikes.

‘’As a result, a number of local super funds are considering an offshore strategy again and we are well placed to assist.’’

Mr Fallet says that while the fund ‘’currently has a buy-side bias to the United States, we have a watching brief on further investment opportunities in Europe and Asia”.

The AMP Capital Global Direct Property Fund gives Australian superannuation funds access to core and core-plus direct property investment opportunities in large, liquid and transparent offshore markets.

The fund invests in a strategic mix of international direct property assets across all the property sectors.