Milligan gets financial backing for ‘world’s tallest hybrid timber tower’

Milligan Group has won the backing of Merricks Capital to finance a Sydney CBD site.

The hard-pressed city office market has received a shot in the arm with private developer Milligan Group winning the backing of Merricks Capital to finance a Sydney CBD site where it is planning a $2bn office tower.

The value of office buildings has come under pressure due to rising interest rates, economic uncertainty and the shift to hybrid working but developers insist that top-quality buildings will still attract capital.

Big players like Lendlease, Dexus, Charter Hall and Mirvac have ambitious towers planned around the country and argue that the best properties will succeed despite high vacancy rates.

The move to settle the complicated site on the corner of Sydneys Pitt and Hunter streets comes after five years of backroom negotiations and planning for what is billed as the world’s tallest hybrid timber tower.

It also comes against the backdrop of some developers pushing back planned office towers, fearful that they will be uneconomic as they face rising costs and difficulty in getting finance.

The deal will result in Milligan putting together four buildings that sit on 71 individual titles. Milligan plans to build a 55-storey mixed-use commercial tower on the site which will rise 220m.

The development of the site is expected to slot in beside the planned Hunter St metro station, where two other towers are planned. Big names including pub billionaire Justin Hemmes, Lendlease and Mirvac, are in the mix for those buildings against Canadian giant Brookfield.

Milligan Group founder James Milligan believes the proposed development of a world-class, mixed-use office building will fit with Sydney’s plans to become a world leader in urban design and the creation of lifestyle precincts.

“This is a new generation, sustainable office building. As employers encourage staff back to the office post Covid, feedback from employees has been around shortening the commute and working in high quality, sustainable spaces designed for collaboration and lifestyle,” he said.

Merricks Capital head of private credit Dan O’Donoghue said the company’s close relationship with the Milligan Group and strong investor relationships had been critical in facilitating the $465m funding agreement.

“The Milligan Group is to be commended for their tireless efforts putting the site together and we look forward to working closely with James Milligan and his team to deliver the project,“ he said.

Mr O’Donoghue said the complex agreement required close co-operation with local and international investment partners and reflected Merricks Capital’s expertise in both the private credit market and the commercial real estate sector.

“The acquisition shows that there is a strong market outside of the major banks to fund high quality assets at sensible valuations,” he said.

Merricks Capital executive chairman Adrian Redlich said there had been significant interest in the project from local and international investors.

“The key to providing our investors and partners with a strong risk-adjusted return in the commercial office sector is financing A-Grade products which meet the market demand in this post-Covid world,“ he said.

The private Milligan is a Sydney-based property developer that specialises in creating new benchmarks for apartment living and sustainable commercial workspaces. Its projects include the Workshop office building in Pyrmont, and the development of a new hybrid building in York Street, transforming an 1886 heritage complex into a boutique A-grade commercial space.