Brookfield to sell $480m stake in tower that Cartier calls home
Canadian property giant Brookfield is set to sell its half stake in a 28-storey office tower on Sydney’s George Street to listed Singaporean property investment manager United Overseas Land for between $460 million and $480 million.
The proposed sale of the stake in the A-grade building at 388 George Street – the home to Cartier’s Australian flagship store – comes after two years of significant upheaval in the office market, which has sent valuations plunging.
But many in the sector believe office values are close to bottoming out. Rising interest in Australian assets from international buyers – such as United Overseas Land – has bolstered that belief and could help put a floor on further price falls.
The sale price for the George Street interest of between $460 million and $480 million translates to a capitalisation rate of about 6.2 per cent.
Cap rates – the industry jargon for an investment yield and which typically move in the opposite direction to values – are a handy metric across the sector, allowing landlords, investors and would-be buyers to compare likely values and returns for individual office towers.
The likely cap rate on the mooted George Street deal is in line with those achieved in office transactions this year, such as 5 Martin Place, 367 Collins Street and 40 Miller Street, adding to an emerging consensus on office tower pricing.
But as an indication of just how much valuations have been hammered, the last time a stake in 388 George Street was traded, it was done on a cap rate of about 4.5 per cent. In 2022, Hong Kong’s Link REIT acquired a nearly 25 per cent stake in the office tower – as part of a bigger portfolio deal – that valued the George Street property at that much softer cap rate, The Australian Financial Review understands.
UOL’s half stake in 388 George Street will be held in a trust managed by Investa once the deal is finalised, giving the local real estate manager full management rights of the tower.
Investa already manages the other half stake, which is held in the Investa Gateway Office fund owned by Oxford Properties and Hong Kong’s Link REIT.
Brookfield, alongside the IGO fund, jointly spent $200 million to prepare the tower for sale, which included updating the 38,364 square metres of office inside the tower while adding a 2680-square-metre retail pavilion. Its office and retail tenants include Cartier, QBE, Aware Super and flexible office operator The Commons.
JLL’s Luke Billiau and CBRE’s Flint Davidson and James Parry are managing the sale process. Separate to the deal process, Colliers’ Adam Woodward and James Mitchell advised Investa.
Brookfield, UOL and Investa declined to comment. JLL, CBRE and Colliers also declined to comment.
