John Holland sells $240m Sydney office development to Japan’s Daibaru

An office development at 275 George St in Sydney.
An office development at 275 George St in Sydney.

Sydney’s office market is running hot with Chinese-backed group John Holland claiming a new benchmark on the $240 million sale of its prime office development at 275 George St.

The group has struck a deal to forward sell its under development A-Grade tower to listed Japanese real estate firm Daibiru Corporation that is making its first foray into the Australian property market.

It joins a host of players including Hong Kong tycoons, US funds managers and local superannuation funds that are all looking to secure positions as office rents jump and the deal was struck at a crisp 4.5% yield.

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John Holland chief executive Joe Barr says the forward sale of the 18-storey building reflects its premium nature and strong interest in commercial developments near transport, with the complex close to Wynyard station, which is being overhauled.

John Holland has shifted from being a construction player into also undertaking developments. “We are now a fully integrated property and infrastructure company,” Barr says.

The sale to another new global investor confirms Sydney is still ranked atop global investment destinations

The group picked up the site at from the real estate arm of the Queensland Investment Corporation for $82  million in July 2017 and then reworked existing plans for a new tower.

It pursued plans for a new building of about 8000sqm and garnered a strong response from prospective tenants, with banks chasing the retail space and companies seeking a boutique space after the office component. Demolition has started and construction will begin in the first quarter of 2019.

The play was flagged by The Australian last week and Colliers International’s Sydney capital markets team brokered the deal. National director Adam Woodward says the sale shows the strong demand for Sydney CBD office developments.

“The sale to another new global investor confirms Sydney is still ranked atop global investment destinations,” he says.

Daibiru has appointed TH Real Estate for investment management and development oversight on the project. The fund manager’s head of Australia, Nick Evans, says the Japanese firm is a new partner.

“The building expands on and complements our core real estate exposure and is ideally positioned to benefit from strong CBD tenant demand as well as two major transport development projects in the city,” he said, noting the light rail would also assist the project.

Daibiru has a 24-strong network of buildings in Japan that span offices, hotel buildings, and retail complexes in Tokyo and Osaka.

Chief executive Toshiyuki Sonobe identified the new tower’s quality as a key factor in investing. “A landmark Sydney CBD address, combined with a state-of-the-art quality office development, in a market with high levels of transparency and liquidity is a very attractive investment proposition for us,” he says.

He flagged plans to grow with TH Real Estate and John Holland in future.

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