Pair of Sydney towers set to top $1.5bn
The contests for two of Sydney’s premiere office towers are coming to a head as the year closes, with bidding on the two offers — one by US private equity giant Blackstone and the other by Macquarie Group — putting their combined value at more than $1.5 billion.
The building being sold by Blackstone, 100 Market Street, is winning bids close to $700 million, and a Martin Place skyscraper proposed by Macquarie Group above the new metro station is drawing interest at more than $800 million.
The races for the buildings come as the market shows fresh momentum on the back of low bond yields and the strong performance of real estate investment trusts.
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But the two races appear to be dominated by different sources of capital.
The Market Street offer has drawn interest from offshore parties, with the field including Singapore’s Keppel REIT and US heavyweight JPMorgan Asset Management.
Multiple industry sources pointed to the presence of Link REIT, the diversified real estate investment trust in Hong Kong, with claims it was advancing, although the process run by Cushman & Wakefield and JLL has been shrouded in secrecy and some said it was not a player in the contest.
Senior sources insisted that a final decision was yet to be made on which group would ultimately proceed into negations with Blackstone.
Any sale is likely to be struck at a yield of close to 4%, which would effectively re-rate top-class office buildings.
Meanwhile local companies, some of whom were knocked out of the Market Street race, are now focused on the planned Macquarie tower.
A field of mainly local runners is preparing bids ahead of a first close on December 9. Companies to show interest include local office heavyweights Dexus and Charter Hall, as well as listed rival GPT, which like Dexus could act with its wholesale fund.
The Investa platform is also likely to draw on its knowledge of the area, including its recent successful development of 60 Martin Place, which it co-owns with the Gwynvill Group. It may bid for the tower with the support of Canada’s Oxford Properties.
The contest to buy the Macquarie project upon completion is viewed as a test of the Sydney’s office leasing market over the medium term as it is not due to be completed until 2024.
Bidders must also take into account the risk it may not be finished in a timely fashion if delays hit the broader Metro scheme.
Macquarie’s real estate team is running the tender.
Both processes will see the year finish at a rung above the series of transactions on suburban offices and lower-grade assets, with both buildings considered prizes in the industry.
Blackstone may also reap a windfall after buying the trio of towers above and around Westfield Sydney for $1.52 billion in June if it is able to sell the Market Street building at a premium.
Separately, it has taken a York Street tower it was offering for about $300 million off the market.
This article originally appeared on www.theaustralian.com.au/property.