Starwood and Arrow make $760m play for Altis portfolio

Big portfolio deals are back and the US investment giant, guided by local house Arrow, has struck one of the top portfolio deals of the year.

Arrow partner Asia-Pacific Kurt Wilkinson: ‘Arrow is excited to expand on our investments with Starwood Capital, and to be working with the Altis management team to grow further the income and value of this portfolio.’

US investment giant Starwood Capital and Sydney-based global investment firm Arrow Capital Partners have struck a deal to recapitalise a national portfolio of office and industrial assets held by Altis Property Partners that are worth more than $760m.

The transaction to recapitalise the portfolio assembled by Altis indicates the appetite of global investors for local properties and will see the pair join with the incumbent manager in running the assets.

It continues the run of mega-deals among investors with buyers including Charter Hall, ESR and PGIM all active, and Dexus and Investa each marketing office portfolios.

It will also see Altis reap the benefits of buying early in the commercial property boom and reworking the dozen assets held in the third series of its private unlisted funds.

While deal metrics have yet to be disclosed they would likely show the continued rise of logistics values and the steadying of office buildings as both sectors deal with the pandemic.

The pair said the recapitalisation would allow further investment in the portfolio and provide liquidity for some investors. All up, there are 12 properties worth $760m-plus across Sydney, Melbourne and Brisbane.

The trio of companies will now join in leasing vacant space and expiring tenancies for long-term investment and value creation.

“Starwood Capital is pleased to be investing in this high-quality office and industrial portfolio. The assets are located in strategic markets with limited supply and sizeable demand. This acquisition increases our already significant exposure to Australia which we plan to continue,” senior vice president James Fogarty said.

Arrow partner Asia-Pacific Kurt Wilkinson said: “Arrow is excited to expand on our investments with Starwood Capital, and to be working with the Altis management team to grow further the income and value of this portfolio. We have worked with Altis for many years and value their expertise as high-quality operators.”

Starwood and Arrow first invested in 2017 into the northern Sydney suburb of St Leonards, where they recently achieved planning approval for a development spanning 57,000sq m.

The pair also own the Zenith Towers in Chatswood, acquired in 2019. This will take the value of their investments to more than $1.5bn.

The deal shows the spread of demand to core-plus properties, where managers deploy strategies to overhaul some buildings and reposition for higher returns.