Elanor’s $185m gem in Sydney’s Pyrmont part of CBD fringe strategy

Property funds house Elanor is launching a new trust to hold an office building in inner Sydney Pyrmont that it is buying for about $185m.

The 19 Harris Street, Pyrmont, asset Elanor will pick up from AEW Capital Management. Picture: Mark Merton

Property funds house Elanor is launching a new trust to hold an ­office building in the inner-Sydney suburb of Pyrmont that it is buying for about $185m.

The company is picking up the asset from US funds manager AEW Capital Management, with the play a bet on fringe office markets coming back into demand.

The company, which already has $2.4bn worth of funds under management, is looking to raise about $87.1m from wholesale and sophisticated ­investors, selling shares at $1 a unit.

The fundraising occurs after The Australian last year reported that Elanor was circling the property at 19 Harris St. The office complex comprises seven levels, and the offices span a total of 2000sq m.

Research house Core Property has predicted that the property fund is likely to return 5.2c a unit per annum, with potential to reach 7c within five years.

The property’s current tenants are renting 24 per cent below market rate. However, Elanor Funds Management will look to raise rents when it controls the complex. The building will have generated a healthy return for AEW, which picked it up for $143m in 2018 from a private client of UBS Asset Management. AEW held the asset in its Value Investors Asia fund ­series.

The seven-storey A-grade building was sold via JLL’s Luke Billiau, Simon Storry and James Aroney, but they declined to comment, as did AEW.

Pyrmont has proved popular among global tech companies, drawing Google and WeWork as tenants of the waterfront suburb.

Over the next decade it will benefit from the billion-dollar development of Sydney’s new metro stations, with Pyrmont one of nine stations – including Five Dock, The Bays Precinct, Burwood North, North Strathfield, Sydney Olympic Park Westmead – that will connect the CBD to Parramatta in Sydney’s west.

The 12,568sq m building has campus-style flexible floor plates of about 2000sq m. Thomson Reuters is anchor tenant, and L’Oreal Australia is among the dozen occupants.

AEW also sold its 10 Barrack St complex in the Sydney CBD to Shayher Group for $199m.