Westpac Place deal values tower at $1.7bn
Superannuation fund-backed investment manager ISPT has finalised one of the largest office market deals of the year, taking a half-stake in Sydney landmark Westpac Place in a play valuing the tower at more than $1.7 billion.
The move was made possible by Mirvac assigning its rights to the half-interest in the tower at 275 Kent Street to the fund.
Mirvac said last week it would exercise rights it held as co-owner of the tower stake for a base amount of $721.9 million, which analysts say equates to a price of more than $850 million once planned spending on the tower and retail plaza are taken into account.
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The Australian revealed the involvement of ISPT last week and the fund will effectively pick up the half-interest in the building being sold by US private equity firm Blackstone.
The sale of the interest in the 77,503sqm premium grade office building in the western precinct of the Sydney CBD was a key marker as it showed the depth of domestic demand for top office blocks and that demand was not just coming from offshore tycoons.
Mark Bassett, ISPT Core Fund manager, says the building is an “exciting acquisition” and aligns with the trust’s strategy to acquire quality investment grade assets with strong income security.
Macquarie analysts say that Sydney office rents have increased by 40% since Westpac signed a 15-year lease over three-quarters of the building in 2015
“The asset will provide exposure to a prime Sydney CBD office asset and increase the fund’s lease expiry profile,” he says, noting the depth of its capital partnership with Mirvac.
The pair already co-own a Melbourne tower and a Queensland shopping centre.
Mirvac chief executive Susan Lloyd-Hurwitz also points to their ties, saying that ISPT is aligned with the company’s asset management and development strategy for the building.
“The transaction will see our co-ownership platform with ISPT grow to approximately $2.1 billion in assets under management, based on 100 per cent value,” Lloyd-Hurwitz says.
The Mirvac play also rounds out a successful investment for Blackstone, which bought its stake in the tower for $435 million in 2014 and then re-signed Westpac as anchor tenant.
The asset will provide exposure to a prime Sydney CBD office asset and increase the fund’s lease expiry profile
Mirvac kept a pre-emptive right to acquire the half-interest, which thwarted purchase plans by rival property group Charter Hall, which had been running due diligence on the tower stake.
The sale campaign was handled by JLL’s Rob Sewell, Simon Storry and Paul Noonan and Savills’ Simon Fenn, Ian Hetherington and Ben Azar and analysts estimated a yield of about 4.7%.
Mirvac’s current half-stake in the asset is held at a book value of $555 million and the sale price implies a 30% premium.
Macquarie analysts say that Sydney office rents have increased by 40% since Westpac signed a 15-year lease over three-quarters of the building in 2015 and the buyer will be expecting further rises.
The Westpac tenancy is split over two lease expiry dates, with 15,000sqm expiring in 2024, and 58,000sqm expiring in 2030.
This article originally appeared on www.theaustralian.com.au/property.
