The XCap Office Fund: Income-focused Office Assets in Established Regional Centres

Conditions across regional office markets have tightened as occupier demand and capital concentrate in locations with deep employment bases and modern office stock. Performance has increasingly diverged between assets that sit at the centre of economic activity and those outside it.

Newcastle and Charlestown rank among the most established employment hubs in the Hunter, supporting more than 270,000 jobs across sectors including health, education, public administration and professional services, according to REMPLAN. Their scale and role within the regional economy underpin a depth of office demand that is tied to essential services rather than discretionary or cyclical activity.

The XCap Office Fund is a multi-asset fund available to wholesale investors, comprising Darby Plaza in the Newcastle CBD and a single national office tenancy within Macquarie Tower in Charlestown. The Fund provides exposure to income-producing regional office assets with long lease profiles and established tenant covenants.

Darby Plaza, Newcastle

Darby Plaza and Macquarie Tower A-Grade Office Assets

Darby Plaza is an A-Grade office and retail building located on Hunter Street in the Newcastle CBD. Completed in 2022, the asset comprises 7,978 square metres of net lettable area across multiple levels and is supported by direct access to light rail, the Newcastle foreshore and surrounding retail and hospitality operators. The tenant mix includes a range of national and professional service occupiers such as Life Without Barriers, Pacific International Insurance, Turks Legal, Slater & Gordon and MoneyMe.

The Fund’s interest at Macquarie Tower comprises a single-tenancy A-Grade office stratum located within a broader mixed-use development on the Pacific Highway in Charlestown. The asset comprises 3,037 square metres of office space across three levels and is fully leased to Allianz Insurance on a long-term basis, providing a high-quality tenant covenant within the Lake Macquarie commercial catchment.

Across the portfolio, occupancy is currently at 100%with a weighted average lease expiry of 6.7 years by income.

“What stands out across both buildings is the lease profile: long tenure, stable uses and occupiers that are embedded in the region. Both assets are modern, well-located within their respective CBDs and fully leased, supporting a clear and predictable income profile,” says Jonathan Craig, Director of XCap.

Macquarie Tower, Charlestown

Income Profile and Fund Settings

The Fund is forecast to yield net passing income of approximately $5.6 million per annum, generated from a diversified tenant base across the two assets. Income is derived from long-term leases with a mix of national and regional tenants operating in professional services, insurance, legal and community sectors.

The XCap Office Fund is targeting an average cash distribution of 8.5%-9.0% per cent per annum and a forecast internal rate of return of 11.5% to 12.0% over an anticipated seven-year investment term.

Distributions are forecast to be paid quarterly, and XCap intends to hold an interest in the Fund for alignment with investors.

“From a structuring perspective, the focus is on building resilience into the Fund rather than chasing short-term outcomes. Leverage, hedging and distribution settings are calibrated with the full investment term in mind, so income is supported across different interest rates and market conditions,” says Geoff Robinson, Managing Director at XCap.

Allianz’ tenancy at Macquarie Tower

Office Demand Anchored by Regional Service Centres

Office demand in the Hunter is shaped not just by workforce size, but by how essential services are distributed across the region. According to the City of Newcastle Annual Report 2023–24, the city supports more than 102,000 jobs, drawing workers from across the wider region. Its CBD acts as the Hunter’s primary administrative and professional hub, housing key public sector agencies, legal institutions and advisory firms.

Charlestown is recognised in the Invest Lake Macquarie – Charlestown Suburb Profile (2025) as a major contributor to the local economy, generating around $3.2 billion in economic output and supporting a large resident workforce across Lake Macquarie. The suburb is home to more than 3,000 healthcare jobs and accounts for 36% of the LGA’s output in financial and insurance services.

“In reflection, regional office markets were not negatively impacted by COVID in the same way that CBD office markets were. As a result, vacancy levels remained resilient during that period, supporting a stable rental platform.

“What differentiates office demand in the Hunter is the concentration of decision-making, administration and service delivery employers, seeking to attract staff in concentrated areas underpinned by a strong preference for quality A Grade space. In markets where new supply is limited, the combination of demand and low supply of quality space combines to create a more predictable pattern of occupancy and leasing, which is an important consideration when assessing long-term income durability,” Geoff says.

Street view of Darby Plaza

Delivery, Management and Strategic Fit

Darby Plaza and Macquarie Tower were recently delivered by GWH Group, XCap’s development and construction partner business with a long-standing presence in the Hunter Region. This continuity between delivery and ownership provides an unmatched understanding of how the buildings were designed, constructed and are now managed as long-term investment assets with depreciation benefits.

Both buildings have been completed to contemporary office standards, with sustainability and operating efficiency built into their design. Darby Plaza holds a 5 Star NABERS rating, while Macquarie Tower is targeting a 4.5 Star NABERS rating.

“The Office Fund reflects XCap’s broader investment approach, focusing on regional markets it believes in, delivering a mix of opportunities each defined by its own risk profile underpinned by defined income profiles. For investors, the Fund provides a focused way to access core regional office income within established CBD locations through a defined portfolio and a clear investment structure,” concluded Geoff.

If you’re interested in investing in the XCap Office Fund, please visit the ‘Current Opportunities’ page. There, you can access the Information Memorandum and Trust Deed, which you should read in detail before making any investment decision.