Quintessential agrees to pay $250m for Brisbane CBD tower

Supplied Editorial Brookfield is selling 240 Queen St in Brisbane

240 Queen St in Brisbane has been bought by Quintessential.

Fund manager Quintessential has settled on Brisbane’s largest office purchase this year – a $250m deal to acquire 240 Queen St – after the building’s vendor, Brookfield, trimmed its pricing amid a broader fall in values.

Quintessential had been circling the office block for more than a year and considered a range of structures before striking a deal at below its original $270m offer. The final deal showed a yield in the mid 7 per cent range and came as the leasing market was also improving.

Rents in the city have jumped and the building’s tenancy also lifted with the weighted average lease expiry going from 3.1 years to 4.5 years as the deal was negotiated.

The purchase comes on the back of Quintessential’s purchase of an office tower in Sydney last year from Dexus, which invested about $50m in the unlisted trust and plans to overhaul the tower as leasing markets recover.

The sale of the Queen St block has been closely watched as it is another marker for office values after a series of mid-year transactions in Sydney and Melbourne, as vendors adjust to the large falls that have hit even for A-Grade towers.

Quintessential said the purchase was its second major acquisition in less than a year, after the $293.1m buy of 1 Margaret St in Sydney from Dexus last September. It was drawn by Brisbane’s leasing market that had robust office rental growth of 11.4 per cent for prime face rents in 2023. 

The trend continued with a further 2.7 per cent growth in the first quarter of this year and the city is facing limited supply after developers sold off a number of sites while others are converted to accommodation projects.

Quintessential sees Brisbane as keeping its position as the highest rental growth market in the Asia Pacific region in the medium term.

The Queen St tower comprises 27,632sq m of space and sits in the city’s prime “Golden Triangle”. It is the start of the Queen Street Mall, surrounded by luxury retail outlets such as Tiffany and Louis Vuitton.

Two major infrastructure projects are underway at Albert St and King George Square, which will improve connections to the tower. Building on the $38m upgrades by Brookfield, Quintessential will now invest an additional $31m in regeneration and sustainability upgrades.

The tower is already 97 per cent occupied.

The Commonwealth Bank’s flagship branch is in the retail space on the ground floor along with Hall Chadwick Accountants, ASIC, Hall and Wilcox and Christie Spaces – which operates a co-working space on the third level of the building – on long-term leases.

JLL’s Paul Noonan, Seb Turnbull, Kate Low and Jack Sullivan and Knight Frank’s Justin Bond and Ben Schubert negotiated the sale.

Mr Noonan said the sale “further cements our market as a keen focus for growth-focused investors” in a nod to the run of city sales.

Quintessential chief investment officer Andrew Borger noted the recent focus on southeast Queensland – in particular premium-grade commercial assets – saying it had created a strong sense of competition.

He said once regeneration works were completed, they would align the building with “best-in-class market practices and enhance its ESG credentials”. 

Quintessential raised about $138m from wealthy investors to back the purchase of the Brisbane tower.