This article is from the Australian Property Journal archive
GLOBAL real estate investment manager DWS is the latest vendor to sell an office asset at a major discount, exchanging its 120 Edward Street tower for $24 million less than they paid for it in 2017.
Clarence Property has added the A-Grade office tower in the Brisbane CBD to its flagship Clarence Property Diversified Fund.
“We have certainly seen a softening of yields in the office market nationally, but the Brisbane CBD transaction provides a strategic holding in a market that continues to show remarkable strength,” said Ben Somerville, head of capital transactions at Clarence Property.
The 2001-developed 15,161sqm property spans 18 levels and has undergone extensive upgrades over recent years, boasting a 98% occupancy when purchased from the global real estate investment manager, DWS, who spent nearly $143 million on the asset.
“This acquisition represents a strategic counter-cyclical play in a market that we believe is well placed for the future,” said Simon Kennedy, CEO at Clarence Property.
“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.”
Bruce Baker and Peter Chapple from CBRE managed the sale.
Clarence Property Diversified Fund has a focus on in retail, commercial, medical, industrial and childcare assets, in addition to rural and residential sub-division investments.
“It’s an exciting time for Clarence Property with the purchase of this significant asset to add to our already extensive portfolio,” said Peter Fahey, chairman at Clarence Property.
Office market valuations continued to be dragged down by the growing role of hybrid working, with 91% of CEOs are backing hybrid working, according to recent research by International Workplace Group.
With MSCI Real Assets recently estimated that buyers and sellers of office buildings needed to make up a 30% gap on price expectations for the market to return to “normal” liquidity. With office funds driving value declines across all specialist fund types, with office funds seeing 8.7% drop in capital growth for Q2 2024 or its worst quarterly performance since June 2009.
While foreign investment into Australia’s office, retail and industrial markets topped $7 billion in the June quarter, according to JLL preliminary figure.
Australian Unity Office Fund (AOF) recently sold its Parramatta office tower and adjacent car park for $80.5 million or nearly $70 million less than what the asset was valued at just two-and-a-half years ago.
Following the divestment of 94-96 York Street in Beenleigh for $29.7 million, below what AOF paid in 2021 when it bought the then-new building for $33.52 million, and 150 Charlotte Street in Brisbane for $64.5 million.
With Quintessential snapping up 240 Queen Street in Brisbane at a 17% discount to peak valuation, and Dexus offloading a Parramatta building at 60% below its peak valuation.
Cbus Property is spending $310 million to acquire a 50% share of 5 Martin Place in the Sydney CBD, as reported by Australian Property Journal, which had previously shown a valuation of $405 million two years ago.
And Mirvac has just divested the 40 Miller Street, North Sydney office building to Barings for $140 million, and 367 Collins Street in Melbourne for $345 million, with both deals struck at a 20% discount to peak book values.
