SC Capital Buys Aussie Office From BlackRock for A$127M

SC Capital Partners has purchased an office building in North Sydney from BlackRock for A$127 million ($83 million), as the Singapore-based private equity shop adds another Aussie asset to its portfolio.

Thai financier Suchad Chiaranussati’s firm said that it had acquired the 14-storey property at 2 Elizabeth Plaza on behalf of its open-ended SCORE+ fund, which invests in core and core-plus real estate assets in Asia Pacific.

“With its prominent location in one of the most attractive office markets in Australia, 2 Elizabeth Plaza is well poised for strong rental growth,” said Khun Suchad, adding that the acquisition is consistent with SCORE’s strategy of acquiring “well-located, income generating assets” in markets with strong fundamentals.

Buying an Office Block at 94% Occupancy

SC Capital has purchased the 1989-vintage property for A$16,752 per square metre at a net initial yield of five percent, based on the property’s 7,581 square metres (81,601 square feet) of net leasable area.

Known as 2EP, the property is 94 percent occupied and generates annual passing rent of A$6.4 million, with a weighted average lease expiry of four years.

Tenants of the 31-year-old building, which is located in Sydney’s second most expensive office market after the city’s core CBD, include wealth advisor PIS, global data centre provider Digital Realty, and Nippon Meats.

A source close to the transaction confirmed that the BlackRock fund had acquired the asset for A$81 million in 2017.

Targeting Sydney’s Second Financial Centre

Located just across the harbour from Sydney’s main CBD, SC Capital said in a statement that North Sydney is a “strong leasing market with immediate opportunity to access positive rental reversion”.

“Smaller assets in Sydney and North Sydney are becoming rarer and rarer, driving demand for assets such as 2EP when they come up for sale – a trend we expect to continue,” said Mark Hansen, international director for Australia & New Zealand capital markets at Cushman & Wakefield, which brokered the sale on behalf of BlackRock alongside Chesterton International.

SC Capital noted that North Sydney is set to benefit from significant public and private investment in infrastructure, including the development of a new metro station scheduled to be delivered in 2024.

The firm is topping up its Aussie portfolio after rising rents across Australia’s major cities helped push transactions of office space in the country to a new high of A$22.5 billion last year — up from A$19.97 billion in 2018.

According to Cushman & Wakefield, average net face rents in North Sydney rose five percent in the fourth quarter of 2019 to reach A$830 per square metre per year — up from from A$790 during the same period a year earlier.

Buying and Selling in New South Wales

The acquisition marks the Score+ fund’s second publicly announced acquisition in the New South Wales capital since December, as the company targets what it refers to as “growth corridors within gateway cities”.

Just three months ago, SC Capital announced that it had inked a deal to buy a grade A office tower at 2 Wentworth Street, just outside of Sydney for A$105.3 million.

The firm purchased the 1989-vintage property, which is fully leased with 93 percent of its rental income derived from New South Wales government tenants, from Centuria Property Funds at the equivalent of A$9,597 per square metre.

This latest purchase also comes just over a week after SC Capital’s RECAP fund announced it had agreed to sell an office tower in Sydney’s central business district for A$270 million.

The closed-ended opportunistic fund is selling the 26-storey property at 59 Goulburn Street to state-owned Chinese developer Poly Developments at a mark-up of almost 71 percent just over two and a half years after acquiring the asset.