Singapore’s CapitaLand Integrated Commercial Trust Management Limited (CICT) is set to buy a half stake in a North Sydney commercial complex from fund management giant Nuveen for A$422.0 million ($305 million), in a deal marking the acquisition of its third Aussie asset within one month.
The manager of CICT, a unit of Singapore-based property giant CapitaLand Group, said late Thursday that it has agreed to acquire 50 percent the 101 Miller Street office project and the associated Greenwood Plaza retail development in a bid to continue diversifying beyond its home home market of Singapore after agreeing to purchase its first two Aussie properties earlier in December.
“The entry into Australia will provide CICT with a new engine of growth in a developed market with strong fundamentals, and the potential to ride on Sydney’s gradual recovery and rejuvenation in the mid to long term,” the trust’s manager said in a statement to the Singapore stock exchange.
The acquisition gives CICT half ownership in two office towers and a shopping centre measuring a combined 46,403 square metres (499,478 square feet) of net lettable area (NLA) at 101–103 Miller Street and 36 Blue Street in North Sydney, as Singaporean buyers continue to snatch up office assets in North Sydney and the surrounding suburbs.
CICT Builds Aussie Portfolio
CICT’s new piece of North Sydney includes a 28-storey grade A office tower flanked by an additional 2-floor office building, with the two structures totalling 37,473 square metres of net lettable area. The adjoining Greenwood Plaza retail element adds another 8,930 square metres of NLA. At the stated compensation, CICT is paying the equivalent of A$9,094 per square metre for the complex.
“[The latest property] will strategically augment our presence in Sydney, where we have embarked on acquiring 66 Goulburn Street and 100 Arthur Street,” said Tony Tan, chief executive officer of CICT’s manager. “The total investment of approximately A$1.1 billion ($796 million) in the three Sydney properties will provide CICT with a new engine of growth in a developed market with strong fundamentals, and the potential to ride on the city’s gradual recovery and rejuvenation in the mid to long term.”
With Nuveen having invested in the 1992-vintage property in 2014 after Mirvac Real Estate had acquired the development in 1994, the complex is nearly 95 percent leased at a weighted average lease expiry term of 3.6 years, according to CICT.
Among the 90 tenants accommodated in the building, the top three occupiers are government agency Commonwealth of Australia, insurer Genworth Financial Mortgage Insurance and European insurance giant Allianz, which together account for 44 percent of the total rental income.
Retail tenants in the development include popular brands like Cotton On, Din Tai Fung, Seed, L’Occitane and MAC Cosmetics.
Based on net property income, CICT is acquiring the stake at a yield of 4.9 percent as derived from an annualisation of the project’s 2021 first-half results or a 5.9 percent yield based on a Savills valuation of the property as of 1 December.
With Nuveen selling out some seven years after buying into the complex, Mirvac will retain its 50 percent stake in the complex, while also serving as the manager of the assets. Mingtiandi sought Nuveen for comment but did not get a response on Friday.
Aside from the asset’s A$422 million purchase price, the trust will also be paying the manager acquisition fees worth A$4.2 million and other expenses associated with the deal are expected to total A$28.2 million.
The CapitaLand Investment-sponsored trust plans to fund 51 percent of the acquisition through debt, while the rest will be sourced from the proceeds of its half of the 23-storey One George Street tower earlier this month and around S$95.9 million in private placements.
In a deal announced on 13 December, a 50-50 joint venture between CICT and insurer FWD had sold One George Street for a combined $944 million, with Nuveen paying $472 million for a 50 percent share in the central Singapore asset, while JP Morgan Asset Management paid an equal amount for the other half.
Betting on North Sydney
The 101 Miller Street/Greenwood Plaza complex is just a 10 minute drive from 66 Goulburn Street and 100 Arthur Street, a pair of Sydney office properties which the trust agreed to purchase for a combined A$330.7 million earlier this month.
Following this latest acquisition, some 9 percent of CICT’s portfolio will be located outside of Singapore, with the company having previously purchased a pair of Frankfurt assets before embarking on its Sydney spending spree this month.
CICT’s interest in Sydney’s up and coming commercial districts is aligned with an emerging perception of value in commercial hubs hosting tech-centric, new economy enterprises.
In a report published last week, DWS, the fund management arm of Deutsche Bank, pointed to North Sydney, along with parts of Brisbane and Melbourne as new centres of demand among enterprises benefiting from the innovation economy.
That same theme has been picked up by some of CICT’s compatriots as well, with another Singaporean trust, Keppel REIT, this month closing on its A$327.7 million acquisition of the Blue & William office project in North Sydney from a Phoenix Property Investors joint venture.
In September of last year the SGX-listed trust also purchased the Pinnacle Office Park in Macquarie Park north of Sydney for S$306 million.
Construction work is currently ongoing in Macquarie Park for another Singapore-invested project, Macquarie Exchange, which is an A$750-million project joint venture between SGX-listed Frasers Property and Australian builder Wintek Property Group.
In September last year, CICT’s sister trust, Ascendas REIT, invested A$167.2 million to acquire one of the four office projects in the Macquarie Exchange.