Singapore-based property investment firms ARA Asset Management and Straits Real Estate have invested A$275 million ($207 million; €185 million) in a Sydney office tower.
Straits Real Estate is the property investment subsidiary of Straits Trading Company, an investment company with a 20.95 percent stake in ARA. Through a joint venture the pair have acquired 320 Pitt Street from the Sydney-listed property group Propertylink.
The property is a 32-story office building with a total net lettable area of around 314,000 square feet.
“The investment in 320 Pitt Street is very much aligned with Straits Real Estate’s strategy of redeploying capital into potentially higher return real estate opportunities. We see value in this property as it gives us a healthy stream of income via the building’s existing leases,” commented Desmond Tang, chief executive of Straits Real Estate.
“Beyond that, we also see its potential to be repositioned as a core investment through an asset enhancement programme similar to 114 William Street, which we successfully divested last November, shortly after its enhancement initiatives.”
The property was held by Propertylink in its Propertylink Office Partnership II Fund and the transaction represents a 12.2 percent premium to book value, with the firm realizing an internal rate of return of 40 percent.
Propertylink acquired the asset in partnership with Grosvenor Group and Goldman Sachs in June 2015 for A$200 million on an acquisition yield of 8.27 percent.
Completion of the 320 Pitt Street sale is expected to occur in July 2017 and will generate a performance fee of approximately A$17.9 million to Propertylink.
“This commercial building was initially acquired with our institutional investment partners, as an opportunity in the strengthening Sydney market, with the intention to enjoy income from the asset, leased to Telstra until 2020 and then assess further opportunities to enhance the building at that time,” said Propertylink’s head of property, Peter McDonald.
“While there was no requirement to divest the asset at this stage, we have been very pleased to realise a superior outcome for our investment partners, furthering our track record of delivering strong returns across our business.”