This article is from the Australian Property Journal archive
SPIRITED activity has returned to the Australian office market with $570 million worth of assets changing hands this week, although vendors are accepting deep discounts to get deals across the line as a Parramatta office building once valued almost $190 million, sold for more than 60% below its peak valuation.
Following in quick succession from Dexus and pension fund the CPP Investment Board selling 5 Martin Place in the Sydney CBD , Dexus has traded two more assets in 130 George Street Parramatta and 18 Motorway Circuit Ormeau.
Dexus offloaded the three assets for a combined $383.2 million, with the sale prices reflecting 2024 draft valuations despite dropping down from value peaks.
Dexus and the Dexus Office Partnership sold their 50% interest in 5 Martin Place to Cbus Property for $296.2 million, which reflects a discount of over 30% from the Peak. Dexus’ 25% share, which it acquired in April 2013, accounts for $148.1 million. This is down on the asset’s June 2022 book value of $202.5 million, when it had a cap rate of 4.38% with an initial yield of 4.34%.
At the time of sale, the premium grade office building had a WALE of 2.0 years and occupancy of 97%. Settlement for 5 Martin Place is expected for to occur by 28 June 2024.
Dexus has exchanged contracts to sell its 130 George Street property in Parramatta for $69.1 million. This is down on its peak June 2021 book value of $187 million. Dexus acquired the asset in May 1997 and at the time of sale the B grade suburban Sydney office building had a WALE of 1.2 years and 73% occupancy.
Its most recently reported cap rate for FY22 was at 5.38% with an initial yield of 6.13%. Settlement for 130 George Street, Parramatta is expected to occur in November 2024.
Dexus also sold a South Brisbane industrial asset at 18 Motorway Circuit, Ormeau for $17.9 million, with settlement occurring on 17 June 2024.
The property was acquired in April 2021 and boasts a WALE of 7.7 years and is 100% occupied. In June 2022 the property was valued at $22.5 million and had a 4.50% cap rate with an initial yield of 4.35%.
Cashed up barristers spend big
Meanwhile, the Charter Hall Direct Office Fund has sold its 32-storey Melbourne legal precinct office at 200 Queen Street to Barristers’ Chambers Limited for a reported $190 million.
Barristers’ Chambers Limited, who purchased the office prior to the launch of an expressions of interest campaign, were the asset’s biggest tenant, renting around 74% of the 19,736sqm of lettable area.
Charter Hall has held the property since buying up the majority of Macquarie Group’s Australian real estate platform back in February 2010.
200 Queen Street has had a colourful history. Once considered one of the jewels of Melbourne’s office market in the early 2000s because it was home to the who’s who of major law firms, the office tower was previously owned by MFS Limited, prior to the fund manager juggernaut’s collapse in 2008 owing creditors $2.5 billion.
MFS paid $78 million on 9% yield for the property, acquiring it from Western Australian investor Ralph Sarich in 2003.
MFS attempted to offload the office building to GE Real Estate but the deal fell offer.
Initially the property was earmarked to be purchased by Macquarie, but GE Real Estate emerged at the 11th hour to trump Macquarie’s bid.
However, GE Real Estate changed its mind and withdrew its offer, letting the runner up Macquarie back in the game in 2006.
Charter Hall took control of the asset when it acquired Macquarie’s real estate management platform in 2010.
Office transactions bouncing back
Meanwhile these transactions have given the market a shot in the arm.
Last week Mirvac divested the 40 Miller Street office building in North Sydney to Barings for $140 million and 367 Collins Street in Melbourne for $345 million, both at 20% discounts to peak book values, while Swiss fund AFIAA sold 628 Bourke Street for $115.8 million – some $70 million below what it paid seven years ago.
Recent data shows declining values have wiped a collective $58 billion Australian asset managers’ total real estate assets under management.
As reported by Australian Property Journal this week, the Charter Hall Prime Office Fund is expected to sell up to $850 million in assets.
