Under-construction Sydney tower snapped up for $800m

The building above a new metro station is part of the bank’s dramatic redevelopment on Martin Place, where it is developing two buildings near its existing headquarters.

While the bank will take the bulk of one tower above the station, the new tower at 39 Martin Place will be leased to other tenants via Investa, which is expecting interest from investment banks, financial services companies and law firms. Investa is confident the building will have a wide appeal and can be tailored to tenant needs in the wake of the pandemic.

The deal again displays confidence that workers will return to CBDs over coming years, with big investors pouring capital into city buildings even though vacancy levels will spike this year.

There was a fierce contest to buy the tower ahead of the coronavirus pandemic striking, with industry superannuation fund-backed ISPT first dealing with the bank although it could not agree terms.

The Australian revealed in June that the bank was again negotiating to sell the under-construction skyscraper, with property group Investa then in the frame, although at a discount to original hopes of reaping closer to $1bn.

Investa, which was part of the original process, and now its wholesale fund and Manulife will take out the tower.

While the final terms are confidential they show the impact of the crisis on office developments that carry leasing risk with the prime tower needing to find tenants to move in when it is finished in 2024.

The Investa Commercial Property Fund and Manulife have formed a 50/50 joint venture to hold the tower. The complex will sit directly above the southern entrance of the new Martin Place metro station.

The 28-storey building will sit aside another tower to be occupied by the bank. Both are taking inspiration from the heritage-listed 50 Martin Place.

39 Martin Place will sport top sustainability credentials including a 6 star Green Star, office design rating and 5.5 star NABERS rating.

Macquarie in 2018 struck a deal on the site via the NSW government‘s controversial unsolicited proposals process, seeing off a rival bid by Dexus.

The overall development will be worth billions upon completion and Macquarie could reap further profits by selling off other properties once the cycle recovers.

ICPF fund manager, Brendan Looby said the acquisition was in line with the fund’s strategy given the superior building quality, super prime location, leading sustainability and technology features.

“We also have the opportunity to add value through leasing,” he said in a nod to the $12bn fund manager’s expertise in the field. Investa successfully developed the nearby $1bn 60 Martin Place tower.

Mr Looby is optimistic about a leasing recovery. “We have high confidence in the Sydney CBD office market … we are pleased with the interest already shown by a number of prospective tenants,” he said.

Manulife has been actively investing and pursuing opportunities in Australia since 2017 via direct and indirect investments in the Australian office and logistics sector.

Manulife head of Asia real estate investments Kenny Lam said despite some of the headwinds resulting from the pandemic, the company was expanding in Asia and the area was supported by strong long term macro and demographic prospects.

Investa chief investment officer, Peter Menegazzo said the company had a strong belief in the Martin Place precinct as a premium office location.

This article originally appeared on www.theaustralian.com.au/property