Dexus sold the building at 60 Miller Street, North Sydney, to Hong Kong group Huge Linkage, which owns other buildings in the area.
Property group Dexus is backing up its claim that office values will hold, selling a North Sydney office block for $273m, just above its book value.
The property group has been inundated with offers for its best towers and is also selling a half-stake in Grosvenor Place to China’s sovereign wealth fund, the China Investment Corporation, for close to $1bn.
Dexus offloaded another building on Clarence Street in the Sydney CBD to Singaporean fund manager Peakhurst for about $530m in June, and further assets are on the block.
Dexus is pumping the proceeds back into supporting its funds management unit, logistics projects, preparing new developments and buying back stock.
The company has forecast earnings that are flat on this year, showing it will not be too deeply impacted by the pandemic.
Dexus sold the building at 60 Miller Street, North Sydney, to Hong Kong group Huge Linkage, which owns other buildings in the area. Net sale proceeds of $273m show a 3% premium to the property’s book value.
The 17-level, A-grade office tower spans 19,350sqm and is in the centre of North Sydney’s financial district. The block was built in 1997 and counts Covermore and Flight Centre as key tenants.
Dexus chief investment officer Ross Du Vernet said the transaction “reinforces private market demand for quality office assets in Australia’s gateway cities”.
The deal was brokered by Knight Frank’s Tyler Talbot and Dominic Ong. Mr Talbot said North Sydney “remains an attractive market for both local and offshore investors, underpinned by the huge infrastructure works and attractive rents when compared to Sydney CBD”.
Sydney office assets worth billions of dollars have been put on the block but bidding has been relatively thin for all but the best assets.
Some analysts are more positive. JPMorgan’s property team said on Friday that asset values would recover more strongly than previously expected.
It suggested a K-shaped recovery for commercial property as some asset classes had strong capital growth prospects while others were in decline, with the chasm widening.
JPMorgan forecast a 30% lift for industrial assets, 25% for property with long leases and a 15% lift for convenience retail and self-storage assets.
Transaction markets, apart from large malls, were strong and quality assets were “well bid”. “Capital sources are also allocating equity to relevant asset classes far in excess of pre-pandemic levels,” JPMorgan said.
The analyst reckons office values will drop by 10-15% as CBD vacancy rates for Sydney and Melbourne are forecast to double to 20 per cent and rents are predicted to fall even further.
It expects a 15% plunge in income from larger malls.
