This article is from the Australian Property Journal archive
US group Hines is set to make another huge Australian commercial real estate play, this time with the $600 million-plus acquisition of a North Sydney office tower, as Dexus continues to sell off major workplaces, while office values continue to be reset.
The 100 Mount Street tower is owned by Dexus and its flagship wholesale fund and was completed in 2019. It comprises 35 levels and nearly 42,000 sqm of office space. Major tenant NBN had leased nearly half the tower when it was under construction, although has subleased some of that space to Hollard Insurance, and is likely to head for the exit and move to a building being developed by Lendlease above the new Victoria Cross metro station nearby.
The “for sale” sign was hung up at 100 Mount Street in middle of last year and hopes were at more than $800 million, but the sector has seen hefty revaluations. Office values have been smashed as working from home and flexible working during and since the pandemic emptied offices and forced a re-think from tenants on how much floorspace they required.
Dexus, Australia’s biggest owner of office towers, in recent weeks confirmed $443 million in divestments across the Pyrmont headquarters of Domain and the 145 Ann Street tower in Brisbane. Those deals were struck a discounts to peak values at 35% and more than 20% respectively.
The latest deals come as the pricing gap expectation between buyers and sellers in Sydney has reduced significantly – from 21.6% at the end of 2023 to 6.7%, according to the Australia Capital Trends report from MSCI. While values have fallen, deal-making is now being done.
Ben Martin-Henry, MSCI’s head of Pacific real estate research, recently told Australian Property Journal it is a sign that valuation adjustments are aligning with market expectations.
“We’re seeing a lot more transactions in the office sector, and that’s not necessarily because of stability in the interest rate environment. It seems to be that a lot of investors are trying to get out of the office sector, or at least get them off their books in order to recycle capital into something else, and what we’re seeing is other investors take advantage of these discounts that are on offer,” he told Australian Property Journal.
In Sydney, US giant BGO last month acquired 10-20 Bond Street from Mirvac and Morgan Stanley for $580 million, while Singapore-listed companies UOL Group and Singapore Land Group recently bought Brookfield’s half-stake in 388 George Street for $460 million. They followed Hong Kong toy billionaire Francis Choi sold off $1 Castlereagh Street in the heart of Sydney’s CBD for $196.4 million, at a hefty discount.
Mirvac earlier this year offloaded 40 Miller Street in North Sydney for $140 million, at a 20% discount to peak value.
Dexus is seeking to offload some $2 billion of assets and diversify its portfolio as office tower revaluations drove it to a massive $1.58 billion statutory loss for FY24. This week it reportedly made a bid for the Australian student accommodation portfolio of Campus Living Villages.
Dexus has also recently sold 5 Martin Place in Sydney to Cbus Property for $296.2 million, reflecting a discount of over 30% from peak value, as well 130 George Street, Parramatta and 18 Motorway Circuit, Ormeau, also below peak value.
For Hines, the acquisition of 100 Mount Street would be another key stake in the ground in Australian’s commercial real estate landscape.
In October, it was part of the country’s largest-ever single-asset retail transaction, which saw Blacktown’s Westpoint Shopping Centre sell for $900 million. Hines took a half-share in the megamall.
Hines has also recently teamed up with Canadian pension fund Ontario Teachers’ Pension Plan to snap up two assets in Brisbane’s growing build-to-rent market in a circa $350 million deal. They are party to a $1.5 billion build-to-rent fund.
Hines also has a Collingwood office development that will be the tallest timber building in Melbourne, while at the end of last year it collected two logistics buildings on a 4.1-hectare site on the Gold Coast.
