US giant Hines eyes $600m office tower deal in North Sydney
In one of the biggest office tower deals mooted so far this year, US giant Hines is in talks to buy a North Sydney building for around $600 million, as its owner Dexus consolidates its holdings into the central core of Sydney’s CBD.
If completed as expected, the sale of 100 Mount Street will be struck at around a 25 per cent discount to the $800 million valuation ascribed to it after the 35-storey tower was completed in 2019.
The scale of that writedown reflects just how severely the national office market has been beaten down over the past two years. A surge in interest rates and the trend towards flexible work have combined to push valuations down substantially.
The North Sydney office market was described two years ago as facing a “bloodbath” by Charter Hall’s David Harrison. Its vacancy rate sits about 23.5 per cent, the third highest in the country.
Although completed in 2019, the largest tenant in the near 42,000 square metre Mount Street tower, the NBN, is likely to depart. It has struck a preliminary agreement to take up residence nearby at the new building above the Victoria Cross metro station being developed by Lendlease.
For the Dexus, the proposed sale at Mount Street is part of a broader strategy to sell off around $2 billion worth of assets – primarily offices – over the next three years. Dexus wants to diversify its portfolio, while consolidating its Sydney portfolio within its prime central precinct, and bolster its funds management business.
Last month, it struck a deal to sell a Pyrmont office block for $230 million – less than what it paid seven years ago.
Yet the prospect of a deal at Mount Street of such size also signals a return of confidence among investors that the shake-out in the office sector is finally nearing an end.
On the buy side is powerful US platform Hines, which will be hoping it is investing into a resurgence of interest in North Sydney, spurred on in part by the new metro station there.
Hines has stepped up its investment focus on Australia. In October, it teamed up with local fund manager Haben to acquire Sydney’s Westpoint shopping mall for $900 million.
Both Hines and Dexus declined to comment on the proposed Mount Street deal, as did Knight Frank, the agency handling the sale.
