Global funds chase stake in hot Sydney office market

Built is developing and selling Sub Station No.164.
Built is developing and selling Sub Station No.164.

Global funds manager TH Real Estate has again leapt into Sydney’s hot office market, preparing to snap up Built’s headquarters which are now being constructed for a price believed to be about $170 million.

The group, one of the largest real estate investment managers in the world with $US115 billion in assets under management, has emerged as a major purchaser of boutique Sydney office assets.

It recently advised listed Japanese real estate firm Daibiru Corporation as it bought another prime CBD project — the John Holland development at 275 ­George St — for $240 million, but it is unclear which group is backing its latest play.

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A wide range of buyers are chasing boutique office assets around Sydney, hoping to capture rising values as city rents surge.

Elsewhere in the city, more than $200 million worth of fringe buildings are close to changing hands. AEW Capital Management is buying 19 Harris St, Pyrmont, from a client of UBS Asset Management for about $140 million.

Meanwhile, MTAA Super is buying One Hundred Broadway, which will be occupied by UTS, from Impact Investment Group for more than $70 million.

The run of sales, and a high volume off-market offers being pitched at landlords, indicates the strength of the demand at time when the market has focused on major sales, including a stake in Chifley Tower and Brookfield assets in Shelley Street.

Built is taking two historic buildings in Clarence St and redeveloping them into an A-grade office tower with a heritage component, but did not comment on the sale.

The project, branded Sub Station No. 164, is at 183-185 Clarence St, and won development approval in July. Built says that the 7867sqm office tower will push the boundaries of heritage redevelopment, with a seven-level sculptural glass extension designed by architect Richard Francis-Jones of FJMT.

Built will develop and construct the project that will also include the restoration and refurbishment of seven floors in the existing heritage Shelley Warehouse and adjoining former electrical substation. The project is due for completion in the first half of 2020. Colliers International and Cushman & Wakefield are managing the sale but declined to comment.

Built will be an anchor tenant in the building, committing to lease about 2800sqm, and the city’s tight leasing market will see other tenants vie for space with Cushman & Wakefield handling that component.

The development will also offer landscaped outdoor terrace spaces, boutique retail and quality end-of-trip facilities. The former substation’s Machine Hall will be restored and converted into an arts and creative hub.

Built is a major private construction group with more than of $2 billion of work in hand. The company is behind many of Sydney’s heritage refurbishments including QT Sydney at the former Gowings Building and QVB as well as the Old Treasury Building in Perth.

Daibiru has appointed TH Real Estate for investment management and development oversight of its 275 George Street project. However, the fund manager’s head of Australia, Nick Evans, declined to comment on the latest play.

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