Ashe Morgan swoops on Edward Street tower in trust play
Funds house Ashe Morgan is circling an office block on Edward St in the Brisbane CBD. Picture David Clark
Funds house Ashe Morgan is circling an office block on Edward St in the Brisbane CBD and is looking to commit about $120m to pick it up for a new trust.
The real estate firm is seeking to raise capital for a new unlisted trust that would hold 120 Edward St, with the pitch that investors could ride the recovery in the city’s leasing market.
Ashe Morgan has emerged as one of the largest office buyers nationally this year after striking a deal to team up with a unit of Japan’s famed trading house, Mitsubishi, to acquire 60 Margaret St and the MetCentre in Sydney for just over $777m. That skyscraper and retail centre was sold off by property group Mirvac and US private equity giant Blackstone.
The Brisbane tower is being sold by DWS Group, which was formerly Deutsche Asset Management. It bought the tower from Axis Capital for $142.7m in 2017 and then refurbished it.
The German investor has been trading out its Brisbane holdings. It sold the former FA Pidgeon & Son tower at 313 Adelaide St to Sydney-based Prime Super and adviser Whitehelm Capital for almost $160m in 2019.
In the latest Brisbane play, Ashe Morgan is paying a headline price of about $106.3m for the tower, with adjustments to take the effective payment to about $120m, sources said.
It would show a passing yield of about 7.8 per cent and, once the building was fully leased, about 9.6 per cent.
CBRE’s Peter Chapple, Bruce Baker and Tom Phipps are handling the deal but declined to comment, as did the parties.
The A Grade 18-level office building spans 15,161sq m and was built in 2001. It has since been upgraded and is rated 5 Star NABERS, with scope to improve.
Ashe Morgan would be paying about $7014 per square metre, which is close to half of its replacement cost. The purchase reflects a 7.5 per cent core capitalisation rate, which shows a softening of 150-200 basis points in the Brisbane market on just 18 months ago.
The deal would be lower than the vendor’s purchase in 2017 and reflect similar pricing to mid-2008, when the building traded at about $122m.
Ashe Morgan is billing the deal as allowing it to capitalise on market trends, including the flight to quality for smaller tenants and the improving transport connections they are seeking.
The buyer would look to reposition the building as a “small format” A Grade building and bump up office rents by $50-$75 a square metre.
