Mapletree weighs options for $1.4bn portfolio of office towers

The offer by the Singapore state investor will be the largest sale of an office portfolio since the pandemic, with a staged approach on the cards.

The Mapletree-owned 11 Waymouth Street, Adelaide

Singapore investment giant ­Mapletree is readying to sell off an office portfolio that it assembled for $1.4bn ahead of the pandemic, in one of the largest such disposals this decade.

The real estate firm, owned by Singapore state investor Temasek, was one of the top buyers of local office blocks as foreign investors poured into the sector ahead of the market reset.

The heavyweight fund manager put together the portfolio of buildings across Australian capitals, and has seen them through the worst of the Covid crisis. It is now seeking advice from real ­estate firms on a selldown at a time when investors are again interested in the sector.

Mapletree’s holdings span attractive long-leased assets, which are likely to appeal to institutions betting that office markets are turning upwards, and buildings that will require more repositioning in coming years.

Industry players said Mapletree was likely to split any offer of the properties into at least two tranches, in order to capitalise on different buyer pools. Some individual buildings could also be snapped up by private buyers as many are suburban assets, which could either be repositioned or repurposed.

Any offer would be a key test of demand for suburban assets after a period in which mainly city or long-leased assets have traded, as this has been the most liquid part of the market.

Suburban office markets have been hit by higher vacancies and the shift in capitalisation rates, which has cut into values. But the portfolio could prove a valuable entry point for a new player getting into the market, or if it is split up among wealthy investors and value-add firms.

The fund was one of Mapletree’s largest local plays. It holds properties including 11 Waymouth Street, Adelaide, and it also has several buildings in Sydney including 111 Pacific Highway, 118 Talavera Road, 1G Homebush Bay Drive, and 22 Giffnock Avenue.

67 Albert Avenue in Sydney

Other Sydney assets also include 67 Albert Avenue in Chatswood and 78 Waterloo Road in Macquarie Park. In other states, the trust owns 144 Montague Road in Brisbane, and in Melbourne it has 417 St Kilda Road.

In late 2019, Mapletree closed the commercial private trust known as MASCOT after raising $654m in equity. Mapletree retained a 24 per cent stake in MASCOT, which it said showed its interest was aligned with those of the investors. Other backers included Asian group Sinarmas Land.

It said at the time that MASCOT aimed to deliver an attractive total return by investing in high-quality commercial assets in Australia. It was billed as an income-yielding fund comprising 10 commercial assets across key gateway cities, namely Sydney, Melbourne, Adelaide, Brisbane and Perth.

Mapletree was one of the busiest property buyers over the last period, snapping up a series of suburban buildings and industrial parks. The industrial assets are held separately.

When Mapletree announced it had closed the MASCOT trust, it said the towers would have had a total asset value of about $1.4bn.

The MASCOT fund was launched with a term of five years with provision for two, one-year extensions, and also attracted pension funds, insurance companies, regional banks and corporations, as well as family office investors.

The portfolio spanned a total net lettable area of about 160,000sq m. The tenant pool comprises top occupiers from ­industries ranging from tech­nology, media and telecommunications to government and mining, oil and gas.

Mapletree forged into Australia in 2014 and expected the limited-supply office assets in the pipeline would mean rents grew over the medium term. While the market was derailed by the pandemic, there is more optimism emerging about the office sector.