More than $300 million worth of office and industrial property assets have changed hands in a deal between Propertylink and the US real estate investment trust Equity Commonwealth, led by billionaire businessman Sam Zell.
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It will see Propertylink buy the office tower at 320 Pitt Street, Sydney, for $200 million, and eight industrial assets across Australia for $103.3 million. Goldman Sachs and Grosvenor Group are co-investors in both elements of the transaction.
Telstra has a lease for all of the 30,000-square-metre office block for five years, after which Propertylink, run by industry stalwart, Stephen Day, has the option to retain its as commercial or look to convert to residential.
The well-telegraphed deal is an indication that high-end investors are confident of more improvements in the eastern seaboard office sector.
It also comes as the sector awaits the sale of the $8 billion Investa Office Fund (IOF) platform, which has a range of potential buyers in the second round of due diligence. These include overseas funds such as Blackstone,Brookfield, CBRE and LaSalle Investment Management and local groups, DEXUS, Cromwell and possibly, Mirvac.
According to analysts at CLSA, the outcome of the Investa sale will materially impact the Australian real estate investment trust office sector landscape with IOF the only major pure office player.
Peter McDonald, executive director and head of property of Propertylink said the property at 320 Pitt Street was on a yield of 8.26 per cent and was brokered by Rob Sewell and Paul Noonan of JLL.
It follows the recent $635 million acquisition of the Warterfront Place and Eagle Street Pier, Brisbane, by DEXUS Property and the DEXUS wholesale property fund.
Mr McDonald said Propertylink was focused on the office sector and would look to increase its exposure in the coming year. He said the preference was to co-invest, which gives the group flexibility in the deals and access to capital.
"This latest acquisition provides us with an enormous opportunity to apply Propertylink's active management approach to drive the value in these assets," he said.
The eight industrial properties included in the combined transaction are in Sydney, Brisbane, Melbourne and Perth with a weighted average lease expiry of 3.3 years. The purchase reflects a passing yield of 10 per cent and was brokered by Michael Fenton of JLL.
The acquired industrial properties will be included in the Propertylink Australian Industrial Partnership Portfolio which now has 36 assets valued at about $700 million.
Propertylink also recently acquired value-add commercial properties at 73 Miller Street in North Sydney, in partnership with China's Fosun Property, for $116 million and 15 Talavera Road in Macquarie Park.
