Brookfield Said Selling Half-Stake in Sydney Tower to UOL, SingLand for Up to $330M

Asset management giant Brookfield is in talks to sell its half-stake in a Sydney office tower to companies of Singapore’s UOL Group, with a local media report putting the deal’s value in a range of A$460 million to A$480 million ($316.8 million to $330.6 million).

The sale price for the 50 percent interest in 388 George Street, a 28-storey building in the Harbour City’s downtown, translates to a capitalisation rate of 6.2 percent, according to the account published Thursday by the Australian Financial Review.

UOL and its Singapore Land subsidiary are in “preliminary confidential discussions” with a party on the possible acquisition of a 50 percent stake in a building in Sydney, the companies acknowledged in Thursday filings with the Singapore Exchange. No definitive terms have been agreed between the parties, they said.

“The company will make the appropriate announcements where there is further material development regarding the potential transaction, in compliance with the applicable rules,” SingLand said in its filing.

A source with knowledge of the talks didn’t dispute the AFR account when queried by Mingtiandi on Friday. A broker source confirmed that JLL and CBRE are the selling agents for the stake.

JV With Oxford, Link

Canadian group Brookfield holds 388 George Street in a 50:50 joint venture with Investa Gateway Office, which in turn is a JV of Canada’s Oxford Properties Group and Hong Kong-listed Link REIT.

Link made its investment in the 2020-vintage tower two years ago as part of a larger deal in which it acquired a 49.9 percent stake in a portfolio of office assets in Sydney and Melbourne for A$596 million (then $428.2 million).

Asia’s biggest listed property trust purchased 100 Market Street in Sydney as its first Australian asset in early 2020, and Link underscored Down Under property bets as a key theme of its overseas ambitions as it sought to diversify its portfolio.

“Certainly in the last few years, in Hong Kong and China, retail has been challenging,” Link CEO George Hongchoy said at Mingtiandi’s Hong Kong Forum in May. “That has been offset by our Australian shopping malls and office buildings that we have in Sydney and Melbourne.”

The AFR observed that Link acquired its nearly 25 percent stake in 388 George Street in 2022 at a softer cap rate of 4.5 percent, or 170 basis points lower than the yield implied in Brookfield’s potential sale price, which values the asset at up to A$960 million.

Oz Office Rebound

Australia’s commercial real estate market saw a revival in the second quarter of 2024, with deal volume jumping 24 percent year-on-year to $6 billion, according to the latest Capital Tracker report by MSCI Real Assets.

The office sector led the way with a pair of big-ticket deals in Sydney: Keppel REIT’s $237 million acquisition of a 50 percent stake in 255 George Street and Mitsui Fudosan’s $1.3 billion buy of a 66 percent stake in 55 Pitt Street.

“With prices having declined substantially from peak values and yields expanding by more than 150 basis points, investors have been tempted back into the sector,” MSCI said.