This article is from the Australian Property Journal archive
SINGAPORE’S Keppel REIT has teamed up with Lendlease to acquire the Blue & William A-grade office building project in North Sydney for $327.7 million on an initial yield of 4.5%.
Sydney developer Thirdi and their partner Phoenix Property Investors have been preparing the 14,400 sqm commercial project at the corner of 2-4 Blue Street and 1-5 William Street, which will have 10 floors with harbour views of Sydney’s CBD and the Harbour Bridge, and is close to North Sydney’s rail and bus interchange and the future Victoria Cross metro station.
Keppel REIT Management Limited head of investment and deputy CEO Shirley Ng said the acquisition is in line with active portfolio optimisation strategy.
“This DPU-accretive investment brings an initial net property income yield of 4.5%, which will enhance Keppel REIT’s overall portfolio returns.
“The investment will also see Keppel REIT expand strategically into North Sydney, a major commercial district with positive leasing dynamics,” she added.
“Notwithstanding the pandemic, North Sydney recorded its third consecutive quarter of positive leasing demand in 3Q 2021, with new and refurbished buildings continuing to be drivers of leasing also enhance connectivity to North Sydney and support future demand in the market. With no new significant supply anticipated for North Sydney until 2024, the market is well placed to absorb the current availability of stock and drive vacancy down. The completion of the new Victoria Cross Metro Station in 2024 will also enhance connectivity to North Sydney and support future demand in the market.” Ng said.
Lendlease will develop the building, which will then be owned by Keppel REIT. The deal includes a three-year rental guarantee from Lendlease.
Practical completion of the Woods Bagot-designed development is estimated in mid-2023 and over 3,000 new jobs are expected to be created by the project.
It is aiming for a 5 star Green Star and 5.5-star NABERS Energy Rating.
Two years ago, Thirdi had reportedly shopped around the site that had been cobbled together from 40 apartments across five apartments blocks on 2,326 sqm of land. The office development was expected to have an end value of $330 million.
Upon practical completion of Blue & William, Keppel REIT’s assets under management (AUM) will grow to S$9.0 billion across 11 properties in Singapore (77.1% of AUM), Australia (19.5% of AUM) and South Korea (3.4% of AUM).
Ray White Commercial monitored close to $2.45 billion in suburban Sydney office transactions over the first nine months of the year. These included the $463 million sale of the Woolworths HQ in Bella Vista – the largest ever suburban office transaction – and a 50% stake of The Locomotive Workshop in Eveleigh for $231million.
“While these assets may be out of reach for smaller, private buyers the confidence shown by large domestic and offshore corporates to invest in the suburban office markets has not gone unnoticed by this emerging savvy buying group,” Ray White head of research Vanessa Rader said.
Sydney’s suburban office pipeline currently totals 1.08 million sqm of significant office stock across 87 projects. If including industrial assets with ancillary office space the volume would extend beyond two million sqm of potential stock and represent over 400 projects. DA Approved stock accounts for 45.10%, with the majority in western Sydney including larger data centre developments.
There is a further 490,125sqm of stock in the early planning and DA applied stage which is expected to remain on hold in the short to medium term.
Investa Property Group had its plans for a $500 million commercial tower at 105-151 Miller Street in North Sydney knocked back. It had planned for a 27 storey A-grade tower on the 6,600 sqm site home to the MLC building that was the largest office building in Australia when it opened in 1957 with nearly 42,000 sqm of floor space.
