Ping An weighs $900m exit from Salesforce Tower stake

A lift in sentiment at the top end of the office market has Chinese giant Ping An Real Estate again readying to sell off its half stake in the Sydney Place development.

The 56-storey, 263m Salesforce Tower is Sydney's tallest commercial building

Chinese giant Ping An Real Estate is again readying to sell off a half stake in the Sydney Place development at the city’s Circular Quay, which is worth about $1.8bn in total.

The interest in the complex, which is anchored by Salesforce Tower, the city’s tallest office tower, is expected to be chased by global players who are betting the top end of the market is improving.

The Chinese group has tapped agents for advice on a prospective sale that would see it exit its $900m interest in the tower, which it holds alongside Japanese groups and a fund managed by developer Lendlease.

The move comes after Japanese investment manager MEC Global Partners Asia finalised a move to take an interest of just over 10 per cent in the landmark complex. The MEC Global Partners Asia deal was seen as a key marker for premium office values as the cycle shows signs of recovery.

It was struck in the mid-5 per cent yield range, giving investors confidence in the value of premium towers in Sydney. The buyer raised funds from a collection of Asian investors, including Japan’s Odakyu Electric Railway Co.

The 56-storey, 263m Salesforce Tower is Sydney's tallest commercial building.

They were keen to buy into the tower after MEC’s sister company Mitsubishi Estate Asia put a 30 per cent interest in the tower up for sale last year. Both MEA and Ping An backed the development of the skyscraper by Lendlease in 2016 and have sought to exit after it was completed.

The Chinese group first brought its half stake in the Sydney Place development to market in early 2023. But that process was hit by the rapid jumps in interest rates that crunched office values. But big investors are now betting that the prime end of the market will pick up, particularly as leasing at the top end improves.

Ping An’s move comes as the exodus of Chinese capital from major real estate investments around the country continues, with both passive office holdings and apartment developments being sold off.

Developer Billbergia Group and private credit house Metrics Credit Partners last year snapped up a site for a $3bn luxury apartment and hotel project from Han’s Holdings Group that will overlook Hyde Park in the heart of Sydney.

Lendlease is also making a play for another luxury development site on Hyde Park, which is being sold by a Chinese player. It is working with MEA on a move to buy into 175 Liverpool Street, which is owned by interests associated with Chinese-Australian billionaire Hui Wing Mao.

Ping An is offering up a more traditional real estate investment, as the passive stake in the office tower will deliver more certain returns. There have already been earlier trades in the Sydney Place project.

Developer Lendlease in 2022 sold a 20 per cent stake in the complex to its Australian Prime Property Fund Commercial vehicle in 2022 when the overall project was worth about $2.2bn. All investors hold the asset in a fund managed by Lendlease, The manager runs top towers, including Sydney’s Aurora Place, but this may influence the pricing on the stake.

Big office deals are getting done as the cycle turns.

Property group Investa is finalising a deal to acquire US private equity group Blackstone’s 75 per cent interest in the landmark Grosvenor Place for about $1.4bn. The local platform, which is part-owned by Oxford Properties, has tapped US group BGO and its own office fund to back the purchase, and a deal is expected to be wrapped up this month.

The 55-storey Salesforce Tower, designed by international architects Foster + Partners, has a Platinum WELL Shell and Core rating and the Green Building Council of Australia’s Design & As Built 6-Star Green Star rating. As well as the anchor US tech tenant, the development also houses Greenhouse, the tech-focused growth hub from Investible, Wellington Management, The Executive Centre and JLL.

Leasing markets are tightening and the next wave of super-towers is not due to come online until the next decade, with rival projects by Lendlease and Dexus still in planning. Two towers above a new Hunter Street city metro station are also unlikely to be delivered before 2034, with a consortium of Mirvac, Lendlease and billionaire Justin Hemmes the only runners left in that race after Brookfield pulled out.