Warburg Pincus-backed ARA Asset Management announced on Friday that it had acquired a commercial block in the central business district of Brisbane for a reported A$96.5 million ($68.8 million), in the latest in a series of big-ticket investments down under by the Singaporean real estate fund manager.
Backed by US giant Warburg Pincus and Hong Kong real estate magnate Li Ka-shing, ARA secured the 16 storey building on 133 Mary Street through a private fund managed by the firm, according to the ARA announcement.
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Local news sources said ARA bought the asset from Canadian family-owned property group Quadra Pacific, who purchased the tower in 1993 for A$10.6 million. The North American firm, who are withdrawing from the Australian market, put 133 Mary Street up for sale in July 2018, along with another property further uptown at 288 Edward Street, which was sold for A$113.6 million recently to a joint venture led by Australian firms Heitman and Marquette.
The 140,000 square foot (13,006 square metre) midtown property, which is located close to the CBD’s financial centre in the bend of the Brisbane River and a 10 minute walk from Central Station, comprises 15 storeys of Grade B office space and an adjacent single storey retail block suitable for redevelopment.
The tower was refurbished extensively by Canada’s Quadra Pacific, and is currently occupied by tenants including several Queensland government bodies.
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ARA’s new asset looks set to benefit from a major rejuvenation of Brisbane’s CBD, with a A$7.5 billion pipeline of developments to be delivered, including a new A$2 billion entertainment district called Brisbane Live; a A$1.1 billion precinct of offices, hotels and retail known as Brisbane Quarter. Also in the pipeline is a A$3 billion casino resort, Queens Wharf; and a A$1.4 billion mixed-use development with 1.5 hectares of public and riverfront open space to be known as the Waterfront Precinct.
Despite 133 Mary Street’s current grade B status, ARA were keen to highlight the potential for developing a new grade A office tower to take the place of the current retail element of the project.
“The successful acquisition of 133 Mary Street allows us to showcase our proven track record in repositioning and transforming assets,” Ng Beng Tiong, Assistant Group CEO and CEO of ARA Private Funds said in a statement. “ARA has a strong investor-operator track record, and we look forward to enhancing this asset by developing a new commercial tower to significantly increase its net lettable area and capitalise on positive rental reversions in the Brisbane office sector.”
Ng, who has top responsibility for ARA’s private equity real estate business, is believed to be acquiring the asset on behalf of the company’s ARA Real Estate Partners Asia II fund.
Brisbane has recorded the largest drop in office vacancy in Australia, with over 270,000 square feet of office space absorbed over the past six months, and increasing tenant demand for contiguous floor space of more than 27,000 square feet – which, according to JLL’s Real Estate Intelligence Service, is a strong selling point for 133 Mary Street.
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The 133 Mary Street acquisition is the second acquisition for ARA in Brisbane, and a reinstatement of the real estate fund manager’s wider interest in Australia.
After setting up the antipodean arm of its business in 2015, ARA made its first foray into the Australian market in 2015 when it paid Leighton Properties A$413 million for the 177 Pacific Highway North Sydney development. A year later, in August 2016, it made its first buy in Brisbane with the purchase of the 19,364 square metre HSBC Building at 300 Queen Street.
Outside of Brisbane, the Singaporean fund manager (on behalf of trusts that it manages) bought the Southgate complex in Melbourne from Dexus in 2016 for A$578 million, and secured 50 percent of Olderfleet in Melbourne for A$414.17 million in 2017 from Australian property group Mirvac.
“ARA entered Australia in 2015 and has grown tremendously in the market. Australia remains attractive to the Group due to its sound economic fundamentals, attractive yields and deep and liquid markets,” ARA’s Ng said. “133 Mary Street is a great addition to our diverse portfolio, where the Australia portfolio makes up approximately nine percent of Gross Assets Managed by ARA Group and Associates as at end-2018.”