$1b in office landmarks up for grabs as market stirs
More than $1 billion of stakes in landmark towers in Sydney and Melbourne are up for grabs, the latest sign of confidence that institutional investment activity is re-emerging after the disruption of the past two years.
Both towers are well-known. In Melbourne, super fund REST which services the retail sector, is looking to divest 717 Bourke Street, a 17-storey storey tower, worth $490 million or more, which stands next to Southern Cross Station and near the Docklands stadium.
In Sydney, it is a 25 per cent stake in 1 Farrer Place, the precinct that includes the twin Governor Phillip and Governor Macquarie tower complex, which is drawing offers, with pricing around $700 million.
While substantial in themselves, both offerings come amid increasing evidence institutional investors are one again becoming more comfortable taking large positions in CBD workplaces.
Earlier this month, Singapore’s sovereign wealth fund GIC stepped up for a half stake in an $800 million tower that Charter Hall is developing on Melbourne’s Collins Street. As well, Charter Hall’s Prime Office Fund took out a half stake in the $2 billion Southern Cross towers on Bourke Street.
The trade in office buildings increased by 7 per cent to $5.4 billion, quarter-on-quarter, according to figures from MSCI Real Assets this month.
Adding momentum to such investments, the yield on 10-year Australian bonds, a key benchmark for value in the commercial property sector, has eased back from a high above 4 per cent earlier this year to around 3.5 per cent.
The 43,200 square metre building at 717 Bourke has generous floor plates of 3,000 sq m. Among its blue-chip corporate tenants are Nine Entertainment – the publisher of The Australian Financial Review – along with BP, NEC and AIG.
Brokering the building are Cushman & Wakefield’s Leigh Melbourne, Nick Rathgeber, Josh Cullen and Mark Hansen along with Knight Frank’s Paul Kempton, Trent Preece, Ben Schubert and Neil Brookes.
“Melbourne remains one of the safest destinations for investment as the Australian economy has proven to be one of the world’s leaders throughout the toughest time of the COVID-19 pandemic,” Mr Melbourne said.
In Sydney, ASX-listed Dexus has brought in the Cushman & Wakefield agency after receiving offers for a 25 per cent stake in the twin-tower complex at 1 Farrer Place.
Dexus controls a half stake, valued at close to $1.4 billion on a 4.25 per cent capitalisation rate, alongside Lendlease’s investment, which topped up its own exposure less than two years ago, buying a quarter stake in 1 Farrer Place from GPT for $584.6 million.
For Dexus, selling down a 25 per cent stake while retaining management will further its efforts in funds management. The group has made a virtue of divesting trophy exposures in recent times, recycling that capital into higher returning opportunities, with many of them being undertaken alongside our third party capital partners.
