This article is from the Australian Property Journal archive
SINGAPORE Exchange-listed Suntec Real Estate Investment Trust has increased its footprint in Australia with the purchase of a Pyrmont office building from developer Milligan Group for $297 million on a 5.5% yield.
The sale price fell short of initial expectations of $310 million plus when the property was put on the market in October last year.
CEO Chong Kee Hiong said the acquisition of 21 Harris St Pyrmont is a strategic fit and expands the trust’s presence in Australia, which includes 177 Pacific Hwy in Sydney, a 50.0% interest in Southgate Complex in Melbourne, and a 50.0% interest in a commercial building under development Olderfleet in 477 Collins St, also in Melbourne.
Following the completion of this acquisition, approximately 14% of Suntec REIT’s assets under management will be in Australia.
21 Harris St is currently under development by Milligan Group and is expected to be completed in 1Q 2020. The nine-storey campus style building will comprise a net lettable area of approximately of 18,888 sqm. It is 91.2% pre-committed and will be anchored by global marketing company Publicis Groupe (10,100 sqm) paying $770 per sqm net, along with co-working office provider Campfire, as well as a childcare centre and a gym operator.
In addition, Milligan will provide a rent guarantee on the unlet office space for three years post practical completion.
“As the underlying demand for office space in Sydney CBD remains strong, rents are expected to remain at elevated levels. Pyrmont is in prime position to continue to benefit from the combination of high rents and lack of suitable offices in Sydney CBD,” Chong said.
Suntec REIT will fund the acquisition with Australian dollar bank borrowings.
The Pyrmont sale is the third major office transaction in Sydney in less than a week. Yesterday Cromwell sold a half share in the Northpoint Tower to its joint partner Hong Kong toy manufacturing billionaire Francis Choi for $300 million. At the same time, it purchased the Altitude Corporate Centre in Mascot for $113.28 million.
Last week US giant Blackstone paid $1.52 billion to buy a 299-year leasehold for three office towers at 100 Market St, and 77 and 85 Castlereagh streets.
Suntec REIT’s purchase at the beginning of the new financial year follows a busy month of transactions, including:
- Dexus settled on the sale of a Macquarie Park office complex for $231.2 million,
- GPT forked out $531 million for a 25% interest in the Darling Park 1 & 2 and Cockle Bay Wharf complex,
- US fund manager Starwood Capital and Arrow Capital bought The Zenith Centre for $438.2 million,
- And the Charter Hall Long WALE REit snapped up the Thales building in Sydney Olympic Park as part of a $206 million portfolio.
