PGIM JV Buys Sydney Tower From Hong Kong’s Choi at Markdown From 2017 Price

Hong Kong toy tycoon Francis Choi Chee-ming has agreed to sell the long-time home of the Australian Securities Exchange (ASX) to PGIM Real Estate and a local unit of US private equity firm Proprium Capital Partners for A$270 million ($169.2 million), according to sources familiar with the deal, as Sydney’s commercial market revives.

PGIM has formed a joint venture with Proprium’s Anton Real Estate Partners to acquire 20 Bridge Street on behalf of the asset management subsidiary of New York-listed Prudential Financial’s flagship Asia Pacific value-add strategy, according to a joint press release.

The partners pointed to tenant demand for higher grade commercial assets in Australia as they laid out plans to upgrade the building known as Exchange Centre after the bourse relocates by October of this year.

“The office sector in Australia has been more resilient than most global office markets, but we see a similar trend in terms of the flight to quality,” said Steve Bulloch, head of Australia for PGIM Real Estate. “The asset’s strong location, coupled with the significant repositioning plan, allows for us to represent a high-quality asset back to the market but at competitive rents compared to the nearby premium towers.”

Markdown From 2017 Acquisition

PGIM and Anton are purchasing the 14-storey block, which measures around 20,150 square metres (216,893 square feet) by net lettable area, from Choi’s Early Light International following a series of earlier sales by the troubled Hong Kong firm.

The sale reflects a markdown of A$65 million from what Choi spent to acquire the 1999-vintage office property in 2017. Knight Frank represented the Toy King in the sale with the property have gone on the market in July last year at an asking price of A$300 million.

At the A$270 million deal price, PGIM and Anton are paying the equivalent of of A$13,400 per square metre of net lettable area, which represents a cap rate in the mid-7 percent range.

Contracts have been exchanged on the transaction, and a 10 percent deposit paid, with the deal expected to close in around eight weeks, pending review by Australia’s Foreign Investment Review Board, Mingtiandi understands.

PGIM and Anton, which are working together for the first time, said they are planning to upgrade the asset with a focus on “enhancing the plaza arrival experience” following the departure of anchor tenant ASX.

Office Back in Fashion

This acquisition marks PGIM’s and Proprium’s return to the office sector after several years on the sidelines as they see demand driven by increasing office utilisation rates and limited future supply boosting the sector’s outlook.

“With the very limited supply and strong increasing demand in Sydney’s prime core office market, we have acquired an attractive asset in the best location with enormous repositioning potential that we will deliver on,” said Anton partner Tony Martin. “It’s a hugely compelling proposition”.

In a report issued on Thursday, market data provider MSCI noted renewed investor confidence in Australia’s commercial real estate sector after a tough 2023, with sectors like industrial and retail leading the recovery.

Australian commercial transaction volumes rose 46 percent in 2024 from a year earlier to reach A$44.3 billion, with Sydney leading a 29 percent upswing in office deals. “However, volumes remained well below long-term averages, and investor sentiment is still cautious,” MSCI said in the report.

Sydney’s central business district led a recovery in Australia’s office capital markets in 2024 with the strongest 12-month transaction total since 2021, according to local fund manager Investa’s research team.

Office demand is expected to strengthen this year on expectations of lower inflation, interest cuts and steady tenant demand, with central Sydney expected to continue leading the recovery, Investa said.

Tycoon Downsizes

Choi has been offloading some of his real estate trophies as Hong Kong’s downturn erodes asset values.

In October the billionaire sold the 1 Castlereagh Street office tower in downtown Sydney for A$196.4 million to an Australian joint venture between Singapore builders Metro Holdings and Sim Lian Group.

Guangdong-born Choi, who ranked tenth on Forbes’ list of richest Hongkongers in 2024 with a net worth of $8.2 billion, founded Early Light in 1972. The privately held firm established its property unit in 1997 and has since diversified into businesses including luxury watch retailing, automotive services, and kindergartens.