DWS sells Brisbane CBD office for $24m less than it paid for it
International funds house Deutsche Asset & Wealth Management has sold an A-grade Brisbane office tower for $119 million to local property fund manager Clarence Property, after paying almost $143 million for the asset seven years ago.
According to sources familiar with the deal, the sale represents a discount of between 20 per cent and 25 per cent from its peak value, and a yield of 8.46 per cent.
In acquiring the 18-storey office tower at 120 Edward Street, Clarence Property has joined the growing number of private investors making counter-cyclical investments in the Brisbane central business district market.
“This acquisition represents a strategic counter-cyclical play in a market that we believe is well placed for the future,” said Clarence Property chief executive Simon Kennedy.
“The property has been acquired at well below replacement cost and the resilience we have seen in Brisbane in recent years positions it as one of the standout office markets nationally.”
Clarence Property is a long-established fund manager that has focused primarily on commercial property in south-east Queensland and northern NSW.
The discount on the deal is a sign of how office values have dropped at least 20 per cent, but Clarence’s acquisition is also a vote of confidence in the Brisbane CBD, which has maintained healthier vacancy rates than those in other capitals.
The city’s vacancy rate in July was 9.5 per cent – much lower than the national CBD vacancy rate of 13.6 per cent, according to latest Property Council figures.
The sale follows a wave of private investors and unlisted real estate funds snapping up office buildings in Brisbane and the Gold Coast, which offers opportunities to buy for lower prices and at higher yields.
Last month, Quintessential confirmed its long-mooted purchase of 240 Queen Street for $250 million – a 17 per cent discount.
Other Brisbane deals this year include fund manager Exceed Capital paying Centuria $37 million for a three-storey property in the riverside suburb of Toowong, and Gina Rinehart paying $240 million for 175 Eagle Street.
The Clarence deal wraps a sale process that started more than a year ago. The property was taken off the market temporarily when there were no buyers during the initial sale campaign.
DWS then refitted one of the tower’s floors and signed new leases, taking office occupancy to 98 per cent. The property was brought back to the market in March, leading to its eventual sale.
The 18-storey office tower will be placed into Clarence Property’s flagship diversified fund.
The sale campaign was managed by CBRE’s Bruce Baker and Peter Chapple.
