Units of Singapore’s CapitaLand group have agreed to sell two office buildings in Sydney to CapitaLand Integrated Commercial Trust for an agreed property value of A$672 million ($472 million), marking the SGX-listed REIT’s maiden entry into Australia and second overseas acquisition since CICT acquired an asset in Frankfurt, Germany in 2018.
The trust’s manager on Friday announced the acquisition of 66 Goulburn Street and 100 Arthur Street in two of the Harbour City’s prime commercial hubs for a cash consideration of A$330.7 million, plus assumption of responsibility for debt associated with the two assets, the manager of CICT said in a release.
“Despite the evolving pandemic situation, this is an opportune time for CICT to enter Australia, given its attractive office market underpinned by healthy economic fundamentals in the medium to long term, and expected recovery as the country emerges from COVID-19 restrictions,” said Teo Swee Lian, chairman of the trust’s manager.
CICT’s pair of acquisitions are the third and fourth purchases of Sydney office assets by Singapore-listed REITs in less than three months, following a purchase announced last week by Keppel REIT and a late-September deal by AIMS APAC REIT, as the reopening of borders sparks an uptick in investment transactions.
Factoring in expenses and fees, the acquisition amounts to roughly A$381 million for CICT, whose manager is a wholly-owned unit of the trust’s sponsor, SGX-listed CapitaLand Investment, which in turn is controlled by Temasek-backed CapitaLand. The interested-party transaction is expected to be completed in the first quarter of 2022.
The trust’s manager said that the agreed property value of A$672 million for the pair of Grade A assets was in line with two independent valuations.
Ascendas-Singbridge, which was absorbed into CapitaLand in 2019, had acquired 66 Goulburn Street from GDI Property Group in 2017 for A$252 million. The 24-storey tower in the Midtown precinct of the Sydney CBD, which includes ancillary retail space and a basement car park, was completed in 2004 and spans 22,927 square metres (246,784 square feet) of net leasable area.
Currently 95.3 percent occupied with a weighted average lease expiry term of 2.7 years, the trust has agreed to a property value of A$300 million for the leasehold asset, which has 95 years remaining on its lease term. At the agreed property value, CICT is paying the equivalent of A$13,085 per square metre for the asset.
100 Arthur Street, a 23-storey tower located across the harbour in North Sydney CBD, was completed in 2007 and acquired by Ascendas-Singbridge for an undisclosed sum in 2016. The 27,196 square metre property has undergone refurbishment at a cost of A$17 million to enhance its lobby, entrance foyer, vacant floors and equipment.
The agreed property value for the freehold asset is A$372 million, with the property currently just 62.3 percent occupied at a weighted average lease expiry period of 4.0 years. At the agreed property value, CICT is paying the equivalent of A$13,678 per square metre for 100 Arthur Street.
Both properties are within easy access of public transport and have achieved sustainability ratings under the National Australian Built Environment Rating System, CICT said. 66 Goulburn Street rates 5.5 stars for energy and 4.5 stars for water under the 6-star NABERS scale, while 100 Arthur Street rates 4 stars for energy and 4.5 stars for water.
Selling in Singapore, Buying in Sydney
Tony Tan, CEO of the trust’s manager, said the acquisition of the two assets would help reconstitute and optimise CICT’s portfolio for sustainable returns and growth.
“It enables the recycling of capital from the divestment of our 50 percent interest in One George Street, at an exit yield of 3.17 percent per annum, into two higher-yielding office assets in Australia, at a combined implied net property income yield of 5.2 percent per annum,” Tan said. “The two assets are complementary to CICT’s portfolio, and will enhance our portfolio resilience with further geographical and income diversification.”
Last month the trust announced the sale of its half-stake in One George Street, a 2004-vintage tower in Singapore’s Raffles Place, for S$640.7 million ($475 million), with insurer FWD Group also selling its own half interest in the asset. A Mingtiandi source identified the buyer as a joint venture of JP Morgan Asset Management and Nuveen Real Estate.
In Australia, CICT hopes to leverage the investment and portfolio management capabilities of sponsor CapitaLand Investment, which owns and manages 37 logistics and suburban office assets with 790,000 square metres of area in the key cities of Sydney, Melbourne, Brisbane and Perth.
The CICT portfolio has a property value of S$22.4 billion and consists of 24 assets across the office, retail and integrated development segments, with 22 of them in Singapore (including a 45 percent interest in the under-construction CapitaSpring project) and two in Frankfurt, after the trust had acquired a second German asset from a joint venture between CapitaLand and Singapore developer Lum Chang in 2019.
Singapore in Sydney
CICT’s pair of Sydney acquisitions were announced just four days after its cross-town rival Keppel REIT had announced its own A$327.7 million purchase of the Blue & William office project in North Sydney from a joint venture between Hong Kong’s Phoenix Property Investors and Australian developer Thirdi. That project, which is expected to be completed in mid-2023, is located less than 10 minutes’ walk from 100 Arthur Street.
On 30 September, Singapore-listed AIMS APAC REIT announced that it was buying the suburban Sydney headquarters of retailer Woolworths for A$463.3 million.