In Sydney’s biggest post-Covid deal, Ashe Morgan and a Japanese partner are circling 60 Margaret St

An artist’s impression of Sydney’s 60 Margaret St development.

Sydney’s office market could finish on a high note with real estate house Ashe Morgan and a Japanese partner circling a Margaret St skyscraper in a deal worth about $830m.

The transaction would result in the listed Mirvac and private equity house Blackstone selling 60 Margaret St and the MetCentre, in what would be the year’s largest office and retail trade in the wake of interest rate jumps.

Office buildings have been under pressure, but once complete the deal will show that big investors are still hungry for irreplaceable buildings in major cities.

A series of office transactions were mooted earlier this year but rapidly changing rates blew them off course. The latest crop of deals is accounting for the slightly tougher environment and will help set up a more active market in 2023.

The sale is the largest in the Sydney CBD since the pandemic struck. Its scale has drawn global institutions, with a Japanese partner likely to team with local funds manager Ashe Morgan on a longer-term overhaul.

The precinct around the office and retail property has been lifted by the light rail and the development of Brookfield Place Sydney above the refreshed Wynyard station.

The sale is being handled by Cushman & Wakefield’s Josh Cullen, Mark Hansen and Bridhe Woods, and JLL’s Luke Billiau, Simon Storry, James Barber and Sam Hatcher. They and the parties did not comment.

The move shows that cities are coming back and big capital players are positioning for the next cycle as assets have been repriced. A sale would result in both parties exiting the asset at a level around Blackstone’s $420m buy into the project in 2018. It bought the stake from Hong Kong funds house PAG, while Mirvac has long held its interest in the 1980s tower.

In a sign of confidence in the market, Mirvac is pouring funds into its fresh developments, while Blackstone is also scouting for new property opportunities.

Ashe Morgan has deep experience in the office market and has a knack with retail property, and could look to revamp the centre as the city comes back to life.

The impending sale is a breakthrough which supports the landlords who have argued that their Sydney and Melbourne towers are still at the top of the property tree, even if they have slipped off the peak values of last year.

A series of mid-sized office deals are also under way in Perth, Adelaide, Canberra, and Brisbane. Some are showing discounts but demand is still there for the best assets.

Mirvac flagged about $1.3bn of asset sales at its results in August, including the Margaret St assets and a Collins St tower in Melbourne which buyers are chasing. It also sold a Perth tower, Allendale Square, to Centuria Capital and MA Financial.

The Margaret St property comprises both Sydney’s sixth-largest ­office tower and the MetCentre at the foot of the building. The 36-storey offices have big tenants including ING Bank, Cliftons and OzForex in its 40,772sq m of A-grade space.

Another drawcard is that the MetCentre is well integrated with the offices and has 6500sq m of retail space linked to Wynyard station, making the overall complex a prime candidate for redevelopment in future.