Chinese giant to offload Salesforce Tower stake as prime market bounces back

Ping An is selling a 50 per cent stake in the 55-storey Salesforce Tower in Sydney’s CBD.

Global institutional investors are expected to lead the charge for a half interest in the Sydney Place development anchored by the Salesforce Tower, which is being sold off by China’s Ping An Real Estate for more than $900m.

The company has tapped real estate agencies JLL and Colliers to market its 50 per cent interest in the tower, seeking to capitalise on the upswing in prime rental markets and the rise in sentiment towards major office assets globally.

“We expect to see significant international interest in Salesforce Tower from investors across the region and from Europe,” JLL head of capital markets Luke Billiau said.

“The recovery of the Sydney CBD occupier market coupled with the lack of new supply has created a powerful investment case for Salesforce Tower. We expect the scarcity of this offering will garner interest from trophy investors around the world,“ Colliers head of office capital markets Adam Woodward said.

The asset joins other current big ticket offers including the half interest in the O’Connell Precinct that is being sold by the Abu Dhabi Investment Authority for about $500m via CBRE and JLL. A purchaser could join Lendlease in developing a new multibillion-dollar office scheme.

Brookfeld is also selling a half stake in 680 George Street and 50 Goulburn Street, World Square, with offers tipped around the $450m mark.

Tenants in the Salesforce Tower are likely to re-sign at higher rents in coming years.

The sector is now emerging from the shake-up it experienced in the wake of the Covid-19 crisis, with prime buildings back in demand among both investors and tenants.

Large trusts, led by Charter Hall and Mirvac, called out the turnaround at their annual results amid strong demand for towers they have under construction.

The Sydney market is tightening dramatically, partly due to the constrained supply pipeline, which will see only one major new tower – the Cbus Property-backed Halo – developed in the next four years.

Tenants in the prime part of Sydney’s CBD are also keen to lock in space, and tenants in the Salesforce Tower are likely to re-sign at higher rents in coming years. The shift has been compared to the early part of the upswing in the retail market, which was driven by savvy syndicators in the subregional space before institutions followed suit.

Ping An holds its stake alongside Japanese groups and a fund managed by developer Lendlease. Its move came after Japanese investment manager MEC Global Partners Asia this year finalised a move to take an interest of just over 10 per cent in the landmark complex from sister company Mitsubishi Estate Asia, which has offered up its 30 per cent stake.

It was struck in the mid-5 per cent yield range, giving investors confidence in the value of premium towers in Sydney. The buyer raised funds from a collection of Asian investors, including Japan’s Odakyu Electric Railway Co.

The Chinese group’s stake is expected to attract more interest as it is a larger portion of the tower and could trade in the low 5 per cent range. Both MEA and Ping An backed the development of the skyscraper by Lendlease in 2016, and have sought to exit after it was completed.

Lendlease in 2022 sold a 20 per cent stake in the complex to its Australian Prime Property Fund Commercial vehicle when the overall project was worth about $2.2bn. All investors hold the asset in a fund managed by Lendlease.

Big office deals are now getting done as the cycle turns.

Property group Investa is finalising a deal to acquire US private equity group Blackstone’s 75 per cent interest in the landmark Grosvenor Place for about $1.4bn. The local platform, which is part-owned by Oxford Properties, has tapped US group BGO to back the purchase, and a deal is expected to be wrapped up this month.

The 55-storey Salesforce Tower, designed by international architects Foster + Partners also houses Greenhouse, the tech-focused growth hub from Investible, Wellington Management, The Executive Centre and JLL.