This article is from the Australian Property Journal archive
DESPITE escalating trade tensions between Canberra and Beijing, China’s sovereign wealth fund, the China Investment Corporation (CIC) has bought a 50% stake in Sydney’s landmark Harry Seidler-designed Grosvenor Place for $925 million, in one of the largest office deals of 2020 and amidst a global pandemic.
Dexus has sold a 50% interest which comprises 25% owned by Dexus and 25% owned by the Dexus Office Partnership, in which Dexus holds a 50% interest. The group will realise total net proceeds of $694 million, representing a circa 5% discount to the property’s book value at 30 June 2020, reflecting the current vacancy and short term leasing risk in the asset.
Dexus acquired an initial 25% stake in the building for $271.25 million in 2013 with the investment generating an unlevered annualised total return of circa 12% since acquisition.
CIC is the joint owner of Grosvenor Place and this sale is subject to FIRB approval, with settlement expected in early 2021.
Grosvenor Place is a 44-level, Premium grade office tower with ground floor retail built in 1988. The property interest is leasehold with 78 years remaining on the ground lease. At 30 June 2020, it was 89% occupied and had a weighted average lease expiry of 3.4 years and leased to major tenants Deloitte and Wilsons Parking.
Dexus chief investment officer Ross Du Vernet said this transaction continues its asset recycling strategy.
Dexus has not had property management control of the asset, which has limited its ability to leverage its asset management platform to drive investment performance.
“The sale further strengthens our balance sheet and enables us to organically fund higher return growth initiatives in our funds and development businesses. It also provides improved capacity to undertake capital management initiatives should there be a continued disconnect between public and private markets.” Du Vernet said.
The deal was handled by CBRE’s Flint Davidson, Simon Rooney, Stuart McCann and JLL’s Rob Sewell, Luke Billiau and Simon Storry.
“The transaction marks one of the largest office deals on record and will be seen regionally as a vote of confidence for the Australian capital markets.” Billiau said.
Rooney said this is one of the largest and most competitive office transactions to occur globally in 2020 and demonstrates the strong underlying investor appetite, particularly from foreign capital, for core product in gateway cities.
Recent Real Capital Analytics data also shows international travel restrictions have dragged down Australia commercial property activity in Q3 2020.
Sydney industrial and logistics transactions topped a record $US2.2 billion, overtaking Hong Kong to claim the number spot over the first nine months. Although the industrial sector’s strong performance was offset by declines of 70% and greater in the office, retail, and hotel sectors.
However a recent CBRE report revealed Australian offices remain the most attractive property asset class. Davidson said more so than ever, offshore investors have a positive view of the Sydney market on a regional and global basis.
“An attractive yield spread, historically low financing costs, low vacancy levels on a relative basis and a resilient economy are all key factors driving strong offshore engagement and cross border capital inflows,” he added.
McCann said the Grosvenor process uncovered several new offshore entrants to the Australian office market.
“These investors are actively seeking strategic and long-term partnership stakes in core Sydney office property, a trend we see continuing as assets which have traditionally been tightly held continue to become available,” Mann said.
