Hong Kong trust leads field for $700m tower beside Westfield Sydney

Westfield Sydney towers.
Westfield Sydney towers.

The heat in Australia’s office market has been put on display, with one of Asia’s largest real estate investment trusts heading the field to acquire an office building beside Westfield Sydney for close to $700 million.

The building, which houses the corporate regulator, is being sold by US private equity company Blackstone, which picked it up as part of a package of three towers from local Westfield owner Scentre in a June deal with an overall value of $1.52 billion.

The group in the frame to buy the tower is Hong Kong-based Link REIT, which has been seeking to expand beyond its home market and mainland China, but the contest is yet to be decided.

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The race for the complex drew heavyweights including JPMorgan Asset Management and Singaporean company Keppel REIT as well as a host of other players. But it appears the Hong Kong group may have the edge.

Link REIT mainly owns shopping centres and has been scouting the region for major property purchases. It has already flagged a desire to buy more commercial properties in China’s top cities.

It already has a presence in Beijing, Shanghai, Shenzhen and Guangzhou.

The shift into Australia is part of a broader trend by Asian groups and North American players.

While local real estate investment trusts featured among the buying ranks as their stock prices soared this year, with groups including Dexus, GPT and Charter Hall and Centuria-run vehicles raising capital for office purchases, offshore players are now back.

Sydney’s office market has attracted investors who are bullish about the impact of the new Metro, the soon to open light rail, and remaining tightness in the office rental market.

Cautious developers are also kicking off towers only once they have substantial precommitments either in place or promised.

But more towers are getting under way, notably by AMP Capital, Lendlease and Brookfield. Dexus, Charter Hall, Mirvac, GPT, Investa and Canada’s Oxford Property Group have more on the drawing board.

The latest deal, however, shows the office cycle could be elongated if values keep rising as global investors appear to have set aside any concerns about the soft Australian economy in order to secure a position in the gateway markets of Sydney and also Melbourne.

The redeveloped A-grade complex has the Australian Taxation Office and Scentre as tenants. The building could change hands at a crisp yield of close to 4%, sparking a rerating of the sector. Real estate agencies JLL and Cushman & Wakefield are selling the Market St asset but they and the parties declined to comment.

This article originally appeared on www.theaustralian.com.au/property.