The Forza Pelham Street Fund was an unlisted commercial office fund which held an office building comprising 6,000m2 of Net Lettable Area and 175 car parks on a land allotment of 3,772m2. Located in the prime inner Melbourne suburb of Carlton, the property was leased to 9 tenants on an average lease expiry of approximately 4.5 years. Government agencies account for over half of the net lettable area and many of the tenants have had substantial tenure at the property.
The Fund held the asset for its strong cash flow and prime location. In mid-2016, a tenant vacated their space which provided an outstanding opportunity to rejig tenancies, chance to claw back some NLA and extend sitting tenant leases by offering improved accommodation. Upon conclusion of this strategy, and given the strength of the market for strong cash flow producing assets, a decision was taken to realise the asset which saw it sell for $37.05m to a local private investor.
Given the purchase price of $20.6m, this Fund has delivered an outstanding result to investors, especially given the investment was producing annual distributions of approximately 9.25% per annum. Over an investment period of 4.5 years, the Fund has delivered investors a total return of approximately 140% net of all fees (but pre tax).