This article is from the Australian Property Journal archive
SINGAPORE-listed diversified property trust Keppel REIT has strengthened its relationship with Mirvac further with the acquisition of a 50% stake in 255 George Street in Sydney’s CBD for $363.8 million on a 6% plus yield.
The sale price represents a 9% discount to book value with a first-year yield that exceeds 6.0% and DPU accretion of 1.4% on a pro forma basis. Mirvac will also provide rent guarantee on existing vacancies and potential expiries.
Mirvac’s CEO funds management Scott Mosely said the sale allows the fund to maintain its strong balance sheet, whilst retaining its weighting to the highest quality assets in the best Sydney and Melbourne locations.
“We continuously reassess our portfolio to ensure it is well positioned and delivering the best outcome for our unitholders.
“Keppel REIT is a highly valued and aligned capital partner. MWOF will retain a 50% interest in the asset and we look forward to having Keppel REIT as a co-owner at 255 George Street – a fantastic asset in the heart of Sydney,” said Mosely.
The sale strengthens Mirvac and Keppel REIT’s relationship. They are also joint owners of nearby office tower 8 Chifley Square and the David Malcolm Justice Centre at 28 Barack Street in Perth’s CBD.
Keppel REIT CEO Koh Wee Lih said this DPU accretive acquisition will enhance the quality of the trust’s portfolio.
“We are confident that it will continue to attract companies looking for quality office spaces in Sydney.
“Looking ahead, we will continue to seek opportunities within Keppel REIT’s portfolio for optimisation and capital recycling, while remaining disciplined in capital management, to capture opportunities with attractive total returns over the long term.” said Koh.
255 George Street is a 29-level, A-grade office tower comprising 39,000 sqm of office space and is 93% occupied. The building is anchored by the Australian Tax Office and underwent a $70 million refurbishment in 2022.
It was previously held and managed by the AMP Capital Wholesale Office Fund.
This is the first major office transaction of the year and will set a benchmark for upcoming office transactions.
Office landlords continue to face uncertainty with values expected to weaken further.
Moody’s has predicted that office fundamentals will not rebound this year.
Meanwhile opportunistic investors are eyeing off counter-cyclical deals.
Late last year Elanor Investors Group snapped up 55 Elizabeth Street in Brisbane for $172 million.
Credit Suisse sold the Brisbane ATO building on a 10% yield and made a capital gain of only $2.5 million after buying the asset in May 2011 for $169.5 million from Grocon.
