Lendlease sale sets Barangaroo benchmark

Lendlease has set a new benchmark for Sydney office tower deals this year.

Lendlease has set a new benchmark for Sydney office tower deals this year by selling a 10 per cent stake in its $2.6 billion Tower One in Sydney’s harbourside Barangaroo precinct as it looks to stabilise its balance sheet.

The group flagged more ­activity may be under way in its two other towers at Barangaroo and revealed it would also consider introducing a partner to its planned $1.1bn residential scheme once it was finalised.

Lendlease chief executive Steve McCann said when the group made a decision about launching the project — which would come after an appeal is heard on a court case it won last year to protect its views from the Sydney Harbour Bridge to the Sydney Opera House — it would look at “capital options”.

He said potential investors had already shown interest.

The Tower One sale, flagged by The Australian, was confirmed this week in Lendlease’s results.

Lendlease sold the stake in the out-size office skyscraper to one of its existing partners.

The $2.6bn Lendlease One International Towers, set up in 2015, owns Tower One, which spans 108,100sq m and has 48 ­office levels and three retail levels.

Lendlease is down to a 2.5 per cent stake in the trust, which is held on a cap rate of about 4.5 per cent after a selldown which cut its holding from $246 million to $52m. As well as Lendlease’s APPF fund, the two groups that invest alongside Lendlease are the Hong Kong Monetary Authority and Middle Eastern group QIA.

Neither disclose their activities but Sydney property sources suggested HKMA was most likely behind the transaction.

The move comes as commercial property prices soar amid a backdrop of lower interest rates, rising office rents, and a desire by global investors to buy up local towers. This appetite has also been on display in Melbourne, where the GPT Group’s wholesale office fund has finalised the deal to buy a half stake in a key Southbank tower that is worth about $684m.

The GPT Wholesale Office Fund took full ownership of the 2 Southbank Boulevard tower after buying the interest for $342m.

The vehicle exercised its pre-emptive right to take full control of the A-Grade 55,000sq m office building after its co-owner Frasers Property Australia moved to exit in a play reported by The Australian last month.

The deal, on which JLL and CBRE advised, was struck a tight 5 per cent yield, reflecting the leasing up of 23,000sq m of space after new tenants came into the building after 13 floors were vacated by PwC in 2017.

Major tenant energy transmission company AusNet Services also renewed its lease until 2030.

The moves in Sydney and Melbourne are setting fresh benchmarks for pricing on office towers across the country and come ahead of an expected wave of stock hitting the market, including Canada’s Oxford Properties Group selling about $1bn worth of towers it picked up in the privatisation of the Investa Office Fund.

The GPT Group is also offloading its half stake in Sydney’s landmark MLC Centre.

While the interest is worth about $800m, the offer is subject to pre-emptives right held by Dexus and its main wholesale fund, which are favoured to take full control of the property.