Dexus to develop Atlassian’s timber tower, in $1.4bn deal
Listed property group Dexus has swung back into offices by picking up the ambitious timber tower that Atlassian is building next to Sydney’s Central Station, in a $1.4bn development play.
The purchase signals that the company believes that the best office buildings will fare well despite the coronavirus pandemic pushing some tenants, including Atlassian, to allow their staff to work at home for extended periods.
The new building, which will be home to thousands of technology workers when complete in 2026, also shows that the newest skyscrapers are again rising in price despite leasing markets being tough further down the scale, as tenants leave buildings that can’t be brought up to scratch and be adapted for social distancing requirements.
Dexus has entered into binding terms which provide a framework to fund, develop and invest in Atlassian’s new headquarters, to be located adjacent to the Central Place Sydney development, and within the NSW government-led Tech Central precinct.
The site is at 8-10 Lee Street and the development, spanning 75,088sq m of space, will comprise a market-leading sustainable 40-level office tower with retail amenities and a new YHA at its base, as well as new public realm around Central Station.
The software giant headed by Mike Cannon-Brookes and Scott Farquhar will take a 15-year lease with the tenancy to become Atlassian’s headquarters.
The building has planned a lush multi-story rooftop park that can be accessed by Atlassian’s workers.
The building is targeting 6-star NABERS Energy and 6-star Green Star design ratings. Designed by New York-based SHoP Architects in partnership with Australian firm BVN, the building will comprise a hybrid timber tower, with four-storey sections to be known as “habitats”, that will have naturally ventilated areas throughout.
As part of the arrangements Dexus will act as development manager and take responsibility for delivering the project, fund the project costs during construction, and retain a long-term equity interest in the asset with Atlassian. The total project costs are expected to be $1.4bn.
The agreement is subject to a number of conditions precedent, including planning and other government approvals, which are expected to be satisfied by December, with construction expected to commence in early 2022 and reach completion in early 2026.
Dexus chief executive Darren Steinberg said the Atlassian tower was a “great example of the future of workplace and is aligned with our purpose of creating spaces where people thrive”.
“We look forward to welcoming Atlassian as a new customer and co-owner onto our platform and building out our developments within the Tech Central precinct,” he said.
Dexus chief investment officer Ross Du Vernet, Dexus said the acquisition increases the size of the company’s city-shaping development pipeline and provides it with appealing risk adjusted returns.
“The exciting sustainability outcomes and initiatives championed at this development are consistent with our ambitions and will enable us to leverage this innovation across our broader platform,” he said.
Dexus will fund the costs of the development through debt and may also look to introduce third party capital into the project prior to completion. The development project will have no impact on the company’s adjusted funds from operations or distribution per security this financial year.