China Communications Construction Company (CCCC) is pressing ahead with overseas projects, buying an office tower in the heart of downtown Sydney through a local company it bought three years ago, The Australian reported this week.
John Holland, an Australian builder acquired by the state-owned giant in 2014, is picking up the former ANZ Bank Building at 275 George Street from QIC Global Real Estate, the property arm of Queensland Investment Corporation, in a deal worth over A$80 million ($60 million), according to the local news account. The Chinese firm has since been repurposing John Holland as a developer as well as a construction firm.
Office Project Could Be Reborn as a Hotel or Commercial Centre
The newly-traded asset currently exists as a 14-storey Grade B tower with 7,357 square metres of office space and a small retail component. However, the site has been approved for the development of a new retail and office building, totalling 7,886 square metres of gross floor area, or a new hotel and/or retail property.
The circa 1966 project was refurbished in 2003 and property consultancy Colliers International represented QIC in the sale. John Holland’s specific plans for the site have not been revealed.
The investment arm of the Queensland state government had acquired the site when it won control of a A$600 million ($453 million) wholesale property fund from LaSalle Investment Management last year. LaSalle had intended to tear down the existing building and replace it with a new office complex.
Sydney’s Office Market is Sizzling
By disposing of the asset, QIC is cashing in on a frothy office market in Australia’s most populous city. Real estate consulting firm JLL reported that office rents in Sydney surged by 22.3 percent year-on-year in the first quarter of 2017, outperforming the rest of the Asia Pacific region. Robust demand for space and rising values are being driven by major new and proposed developments in the area, as well as the city’s A$2.1 billion ($1.6 billion) light rail project currently in progress.
Commenting on the sale process for 275 George Street, QIC Global Real Estate managing director Steven Leigh told the Australian Financial Review that “there was an overwhelming campaign with more than 125 enquiries from all around the world and 25 bids.”
Best known for its infrastructure and rail projects, John Holland has set its sights on diversifying into property development. In early 2016, the company announced a A$1.1 billion ($779 million) development and investment budget funded by CCCC, targeting residential and hotel projects.
CCCC acquired John Holland from Leighton Holdings, one of Australia’s biggest construction companies, for $879 million in a deal that was announced in 2014 and approved by Aussie regulators the following year.
State-Run Builder Has Global Ambitions
State-owned CCCC has been expanding internationally as both a real estate developer and infrastructure builder. In recent years, the construction and engineering goliath has invested or committed over $1.9 billion on major projects overseas, from a $1.4 billion port facility in Sri Lanka to a $290 million investment in a joint venture with Related Companies on the mixed-use Grand Avenue complex in Los Angeles.
CCCC has joined a growing crowd of mainland investors pouring capital into Australian real estate. Chinese investment in commercial property down under totalled A$5.55 billion ($4 billion) in 2016, a slight dip from the previous year, according to a recent report by KPMG and the University of Sydney. Commercial real estate investment also made up the largest share of overall Chinese investment in the country, at 36 percent.
John Holland, which aims to double its revenue to A$7 billion ($5.2 billion) over the next five years, is reportedly also eyeing a A$90 million ($67.3) development site in a northern Sydney suburb.