Swiss Re to offload $1bn office portfolio

Global insurance and investment company Swiss Re will put a massive commercial property portfolio on the block in a move that could garner it more than $1bn.

The company has tapped real estate agency JLL for advice on selling the portfolio of office towers in Sydney and Melbourne, as well as some warehouses in Sydney’s western suburbs, as conditions pick up.

The portfolio, run by AMP Capital, was to be put on the block earlier this year but the plans were derailed as the pandemic struck. The company is now willing to try again as commercial property trades of major offices and industrial parks get back on track.

The five-asset portfolio is likely to draw bids from around the world and could involve a mix of on and off-market sales. Global investors are chasing properties in Sydney and Melbourne and are favouring premium offices and the hot logistics sector.

AMP Capital is also benefiting from strong on-the-ground conditions and recently sold a Macquarie Park property in Sydney’s north to Ascendas REIT for $288.9m, a 17 per cent premium to book valuations.

The move comes as US private equity group Blackstone prepares to offer a $3.5bn logistics portfolio, that could be floated on the Australian Securities Exchange via Morgan Stanley and JPMorgan or sold to another group by real estate firms JLL and Eastdil Securities.

The Sydney and Melbourne office markets are benefiting from a run of deals for premium towers even as vacancy rates rise and lower-grade properties come under pressure.

The portfolio could suit diversified listed players like Charter Hall or Centuria Capital but it could be broken up if that ­achieved a higher value.

It is also expected to garner interest from offshore, particularly from Singaporean groups which have been buying Australian assets.

The Swiss giant moved into the Australian commercial property market in 2017 by awarding AMP Capital a broad $700m mandate to invest in core and value-add real estate locally.

The Australian group has declined to comment but has added value by repositioning the buildings and also lengthening lease terms.

Swiss Re is one of the world’s largest wholesale providers of reinsurance and insurance.

The company was one of the most active purchasers of Australian property three years ago. It bought 32 Walker Street in North Sydney from an Abacus Property and Heitman venture in late 2017 for $74.75m.

The building traded on a 5.7 per cent yield but would now go at a tighter level as the area has seen a run of deals.

It also bought 469 La Trobe Street in Melbourne out of the TCA portfolio for $160.5m. That 19,864sq m tower had been up­graded recently and was fully ­occupied.

Swiss Re also bought into the Sydney precinct surrounding Wynyard station, acquiring half stakes in two buildings in Carrington Street in a $500m deal.

The buildings — at 50 and 60 Carrington Street — are in a precinct that is being transformed by improvements to Sydney’s transport network, including the new Metro network and light rail project.