Allianz fund buys Sydney office for $630m on record-low yield
An Allianz fund has paid $633 million for a 50 per cent share in Sydney’s Darling Quarter office complex. Photo: fjmt studio

Allianz fund buys Sydney office for $630m on record-low yield

Martin Kelly|Feb 01, 2022

International investors Allianz Real Estate and the National Pension Service of Korea have paid a record low yield, below 4 per cent, with their $630 million ($US445 million) purchase of half the Darling Quarter office building on the western edge of Sydney’s CBD.

The transaction, still subject to Foreign Investment Review Board Approval, is expected to close by the end of March.

Darling Park is fully let to the Commonwealth Bank of Australia with an average weighted lease expiry of more than 12 years.

The stake was sold by the Abu Dhabi Investment Authority. Co-owner Lendlease also tested the market but decided late last year to retain its 50 per cent share.

It was bought by the Singapore-based AREAP Core 1 fund, a 50:50 joint venture between Allianz Real Estate, also the fund manager, and the National Pension Service of Korea.

“The pandemic has re-emphasized the importance of micro location, city density, asset quality and ESG when investing in an office asset,” said Danny Phuan, Asia-Pacific Head of Acquisitions for Allianz Real Estate.

“The long-term outlook for the Sydney office market remains favourable, supported by robust economic fundamentals, an attractive labour market and strong infrastructure investments.”

Darling Quarter was marketed by Flint Davidson, Stuart McCann and James Parry from CBRE.

Flint Davidson, CBRE’s Pacific Head of Capital Markets – Office, said Darling Quarter attracted deep investor demand.

“Darling Quarter represents what core capital is seeking: income security and growth, outstanding ESG credentials and the ability to gain exposure to the tightly held premium grade office sector in Sydney.”

He said the high price and record-low yield proved investors still believed in the future of quality workplaces.

“There has been plenty of commentary around the impact of the pandemic on the office sector and this result – representing a record yield for the Australian office market – reinforces investors’ belief in the future of the sector.”