This article is from the Australian Property Journal archive
HONG Kong toy billionaire Francis Choi has taken another hit on the sale of a Sydney office building, offloading the home of the ASX for around $250 million – some $85 million less than what he paid for tower in 2017 – although the deal marks the return of global investors who were sitting on the sidelines, as gap is closing between buyers’ and sellers’ expectations.
As office values were smashed in the fall-out of COVID as employees worked from home, resetting businesses’ real estate requirements, Choi also sold off 1 Castlereagh Street in the heart of the Sydney CBD for $196.4 million, at a hefty discount.
However, the 20 Bridge Street deal is evidence that buyers and sellers are seeing eye-to-eye. According the MSCI, the pricing expectations gap between buyers and sellers in Sydney has reduced significantly, from 21.6% at the end of 2023 to 6.7%, allowing for more deals to be struck. However, many assets are trading well below book value and a far cry from peak values.
Choi purchased the building from Malaysian pension fund Kumpulan Wang Persaraan in 2017 for around $335 million.
On the buy side of 20 Bridge Street are Anton Real Estate Partners, the local arm of Proprium Capital Partners, in a joint venture with US firm PGIM Real Estate.
This deal marks the return of both firms to the office sector after several years on the sidelines, watching and waiting for the asset repricing cycle to reach the bottom.
PGIM Real Estate head of Australia Steve Bulloch said the office sector in Australia has been more resilient than most global office markets.
“But we see a similar trend in terms of the flight to quality. The asset’s strong location, coupled with the significant repositioning plan, allows for us to re-present a high quality asset back to the market but at competitive rents compared to the nearby premium towers.
“Building on the momentum from PGIM Real Estate’s strategic investments in Australia’s logistics and living assets last year, we have been very thoughtful about choosing the right re-entry point to the office sector and believe the current timing is right,” Bulloch said.
Their bargain acquisition, on a circa 7% yield, reflects the repositioning they will need to undertake with the ASX set to leave for the 39 Martin Place tower being constructed above a new Metro station.
Investment into Australian office towers and workplaces surged by 58% in 2024 to nearly $9 billion worth of deals, according to JLL, with offshore buyers dominating the Sydney CBD market. The five biggest deals in 2024 were all in the Sydney CBD, with four of the five buyers being offshore investors.
The US ranked third for investment volumes.
The Sydney CBD attracted nearly half of the national transaction count at $4.38 billion – almost double the previous year’s tally of $2.2 billion.
Recent deals in Sydney have seen US investment giant BGO acquire 10-20 Bond Street for $580 million, in line with the valuation of the asset, but well below the peak value of $697.2 million recorded in June 2022, while a joint venture between Singapore-listed companies UOL Group and Singapore Land Group bought Brookfield’s half-stake in 388 George Street for $460 million on a softened yield of 6.2%.
Dexus sold 5 Martin Place in Sydney to Cbus Property for $296.2 million, reflecting a discount of over 30% from peak value, and Australia’s largest office tower owner also sold 100-130 Harris Street in Pyrmont for $229.3 million – in line with book value, but at a massive 35% discount to the peak value of $358 million two years prior.
