Large office blocks show signs of post-pandemic recovery
Large office blocks are showing signs of returning to pre-pandemic prices, with Sydney-based manager Intera Group snapping up a North Sydney block for $212 million.
The private company associated with Sydney businessman and Jet Technologies founder Albert Malki picked up the tower from the listed Charter Hall. The pair have a close relationship which spurred the off-market deal, introduced by Josh Cullen, Mark Hansen and Steve Kearney of Cushman & Wakefield.
The transaction is another shot in the arm for the office market, where top-end values are holding up even as vacancies rise and major companies weigh up their office requirements in the wake of the pandemic.
The move was also a fillip for the $3.6 billion Charter Hall Office Trust which sold the building at 65 Berry Street at a 10% premium to its June 30 independent valuation. The property sold on a passing initial yield of 5.21%, in keeping with values ahead of the crisis.
Vendors ranging from Dexus, AMP Capital, Credit Suisse, Telstra and RMIT University have sold buildings during the pandemic, but others including Abacus and Challenger have shied away from selling in a sign there were fewer buyers than during the boom. However, next year is expected to be busy.
Newly installed Charter Hall Office CEO Carmel Hourigan said there had been a high volume of office sales at premiums to June 30 valuations, vindicating the company’s view that asset pricing would be resilient.
“The sale of a short-lease asset like 65 Berry Street further reflects the strength in the market for office assets,” Ms Hourigan said.
“In an environment of low interest rates, real estate will continue to be an asset class that is well supported into 2021, particularly as our tenant customer office utilisation rates improve nationally.”
The A-grade office building built in 1986 has 14,500sq m across 17 levels of office space and parking for 262 vehicles, making it good marker for where the market has landed at year’s end.
The building is next to the future Metro station in North Sydney. It was refurbished in early 2019 as part of WPP’s lease renewal and expansion over 70 per cent of the building.
WPP’s lease expires in mid-2023 without an option. It has been in the market to move but is yet to strike a new deal.
The Berry Street building last traded for $74.5 million in 2001 and Charter Hall Office Trust acquired the asset as part of the privatisation of the Charter Hall Office REIT in 2012.
Intera is a long-term believer in office property with a portfolio of A-grade office and industrial buildings across the city.
It has already invested in North Sydney.
Others are also buying at a premium. Last month, Hong Kong’s Huge Linkage bought a $273 million block from Dexus and the billionaire chairman of Western Sydney Wanderers, Paul Lederer, snapped up another North Sydney tower in Berry Street for about $54 million.
US funds manager Nuveen is offering a half-interest in North Sydney landmark 101 Miller Street and Greenwood Plaza, worth about $500 million, via Knight Frank and Colliers International, and has extended bids ahead of what is expected to be a pre-Christmas deal.
This article originally appeared on www.theaustralian.com.au/property.
