This article is from the Australian Property Journal archive
SHANE Quinn’s Quintessential has completed its $250 million acquisition of the 240 Queen Street tower in another deal that marks the drastic falls in office asset values, while the fund manager is bullish about the Brisbane CBD’s prospects running up to the 2032 Olympics and beyond.
Located in the Golden Triangle precinct, 240 Queen Street has 27,632 sqm of floor space, including 24,922 sqm of office space and 2,710 sqm of retail space.
It has occupancy of 97%, with the Commonwealth Bank’s flagship branch in the ground floor retail component and office tenants that include Hall Chadwick Accountants, ASIC, Hall and Wilcox and Christie Spaces – which operates a co-working space on the third level of the building – each of which have committed to long-term tenancy agreements.
“240 Queen Street is a long-term hold. Our goal is asset repositioning over the next three to four years into a stronger market as we head towards the Olympics in 2032,” Quintessential’s chief investment officer Andrew Borger told Australian Property Journal.
“Brisbane’s been the standout office leasing market in Australia over the last two years, and the fundamentals of the economy in South East Queensland are really strong and demonstrate there will be more upside in terms of rental growth and demand.”
Building on the $38 million upgrades and regeneration works by vendor Brookfield, Quintessential will invest an additional $31 million in regeneration and sustainability upgrades, including includes a major upgrade of the entrance and lobby area.
Quintessential secured $137 million in wholesale capital for this acquisition from private investors, marking Australia’s largest capital raise of its kind in 2024 to date.
“We think there’s good opportunities to buy assets, but what’s most significant is that you need to have the capital not just to buy the asset, but to reposition the asset. We want to have buildings that are fully electric and have modern wellness facilities and amenities,” Borger said.
Quintessential bought 240 George Street at a 17% discount to its peak valuation. The thawing of office market transaction activity is realising a marked downwards shift in values in the face of structural headwinds and working from home.
Cbus Property is set to acquire a 50% share of 5 Martin Place in the Sydney CBD for $310 million, as reported by Australian Property Journal, which had previously shown a valuation of $405 million two years ago.
Meanwhile, Mirvac has just divested the 40 Miller Street North Sydney office building to Barings for $140 million and 367 Collins Street for $345 million, with both deals struck at a 20% discount to peak book values.
They came hot on the heels of Swiss fund AFIAA selling 628 Bourke Street for $115.8 million to Bayley Stuart, well below the $185 million it paid M&G Real Estate seven years ago.
The 240 George Street acquisition is Quintessential’s second counter-cyclical office tower play in a year, following its $293.1 million purchase of 1 Margaret Street in Sydney last September. That tower was similarly purchased at a 21% discount to its peak value and will be repositioned by Quintessential.
“We think we’re buying at the bottom of the cycle at the moment,” Borger said.
“We think the market in Brisbane in particular has been undervalued. Brisbane is one of the strongest markets in the Asia-Pacific and one of the strongest emerging cities in the world in terms of GDP and population growth, and we think it’s going to be a really strong investment location for capital as the recovery occurs over the medium-term.”
Bullish on Brisbane
“Brisbane is the smallest mainland CBD geographically, and so you haven’t got significant land available and with construction costs being incredibly high there’s limited supply, so Brisbane has a long way to run in terms of a growth horizon heading 2032,” Borger added.
“We’ve benchmarked global cities that have had Olympics and demand remains high afterwards.”
Brisbane saw 11.4% growth in prime face rents in 2023, which continued into 2024 with a further 2.7% growth in the March quarter. Given limited supply, Brisbane is projected to maintain its position as the highest rental growth market in the Asia Pacific region in the medium-term, Quintessential said.
Borger noted the pending arrival of “two of the largest pieces of public infrastructure in over 100 years will reshape the Brisbane CBD”, with the Cross River Rail station at Albert Street and the new Metro on King George Square to be delivered less than 400 metres from 240 Queen Street and “reorientate the city’s centre to a more central location”.
