This article is from the Australian Property Journal archive
GERMAN fund manager Real I.S. has splurged $97 million on adjoining office buildings in Sydney’s Surry Hills, marking the largest-ever office transaction in the inner eastern suburb.
Private developer Cornerstone Property Group offered the buildings, known as Surry Hills House and No.1 Lacey, to the market in June following the completion of an extensive refurbishment program and unsolicited buyer interest, and in preparation for a new cycle of development opportunities.
Tech unicorn Canva is the anchor tenant. Both buildings are located on the corner of Kippax St and Waterloo St and have a total net lettable area of 6,902 sqm.
Real I.S. has over $16 billion of funds under management, and thereof 1.4 billion in Australia. The deal marks Real I.S. Australia’s 12th acquisition in the country.
“Surry Hills House and No.1 Lacey are undoubtedly some of the best office assets in Surry Hills and we have strong confidence they will continue to perform well into the future,” director of Real I.S. Australia, Maximillian Kube said.
According to JLL research, Surry Hills has a low vacancy rate of 4.4%. The area is home to many technology and media tenants, and the area is set for a major transformation with the planned central technology precinct the includes Atlassian’s new headquarters, and Dexus and Frasers Property Australia’s $2.5 billion Central Place development.
JLL’s Mitch Noonan and James Aroney, together with IB Property’s Steffan Ippolito, managed the transaction. They said the asset’s prime fundamentals include the core Surry Hills location, exposure to technology tenants and close proximity to Central Station.
“As the largest office investment transaction on record in Surry Hills, together with the depth of bidder participation from offshore and domestic capital sources, this is a real vote of confidence in the outlook for prime office assets in the sub-market,” Noonan said.
The assets were 90% leased at the time of sale with a weighted average lease expiry of three years, and the transaction has been approved by the Foreign Investment Review Board.
Ippolito said the transaction and continued strong leasing activity within the building demonstrated the strength of the city fringe office market and the flight to quality in a post COVID environment.
On the other side of town in North Sydney, Charter Hall Office Trust has just sold an A grade office building for $212 million, at a 10% premium to book value, and Dexus offloaded 60 Miller St for $273 million to Hong Kong investor Huge Linkage.
Sam Brown of K&L Gates acted as legal adviser to Real I.S. Australia and Tony D’Agostino of Swaab’s advised Cornerstone.
