Singapore’s Straits Real Estate Buying Aussie Office Assets For $107M

Asian investors continued a string of Aussie office acquisitions late this past week with Singapore’s Straits Trading announcing on Friday that its property division is buying a pair of freehold office buildings in Melbourne for A$150 million ($106.8 million).

Straits Real Estate (SRE), which late last year backed a $500 million Savills Investment Management fund aimed at suburban UK shopping centres, and has also acquired office, residential and industrial assets in Australia for the last several years, positioned this latest deal as a bet on property markets post-COVID-19.

“With the Transaction and the recent GBP 60 million capital committed in October 2021 for warehouse retail parks in the United Kingdom, SRE continues its strategy to invest in assets anchored by strong credit tenants while at the same time offering strong potential for capital appreciation in an expectant post-pandemic environment,” Straits Trading said in a statement.

Straits Real Estate’s deal for 1010 La Trobe Street and its neighbour, 192 Harbour Esplanade, provides the company with a prime stretch of Melbourne waterfront and makes it the latest in a series of Asian investors buying up office assets in Australia’s major cities, following Hong Kong’s Link REIT announcement last week that it will pay A$596 million for a half stake in a portfolio of office assets in Sydney and Melbourne and Singapore property giant CapitaLand Group buying three Sydney office projects in November and December of last year.

Destination Docklands

Straits’ purchase of the nine-storey 1010 La Trobe Street and its five-floor partner, 192 Harbour Esplanade, along with a 163 space parking facility, adds a total of around 21,133 square metres (227,473 square feet) of net lettable office space in the Docklands area west of Melbourne’s central business district to the Singaporean investor’s portfolio.

The company, which is currently developing the Aspire Residences in Melbourne’s CBD, said it has signed an agreement with Docklands master developer Digital Harbour Holdings – a consortium backed by Australia’s billionaire Liberman clan and local property investment firm Qualitas to purchase the waterfront properties.

1010 La Trobe Street is 100 percent leased to tenants including the Australian Department of Home Affairs and railway operator Victoria Rail Track. Completed in 2007, the new owner is also planning to upgrade the establishment by renovating the ground floor lobby and communal areas in all floors and by adding recreational facilities.

192 Harbour Esplanade, which is called the Innovation Building is also 100 percent occupied, largely thanks to its anchor tenant, state-owned National Broadband Network Company.

Together the properties occupy a 6,811 square metre freehold site 10-minute’s drive from Melbourne’s central business district and within 15 minute’s walk of Southern Cross Station and 20 minutes’ drive to the Melbourne Airport.

Straits Diversifying Portfolio

Straits’ latest acquisition will join a portfolio which already includes 320 Pitt Street, a 32-storey freehold office tower in downtown Sydney which it purchased together with frequent partner ARA Asset Management for A$275 million in 2017. The company also owns 45 St Georges Terrace in Perth, which it jointly acquired in 2018 with Redhill Partners, and had engaged JLL to market to potential buyers JLL last year.

Before backing Savills IM’s UK retail venture last year through a joint venture with the family office of ARA founder John Lim, Straits had also acquired a pair of UK business parks, and in 2019 also bought into Australia’s logistics market by paying S$24 million to purchase a Melbourne industrial park from ESR.

“Diversification in a matrix of geographical markets and asset classes will offer us flexibility in how we realise investment gains in the foreseeable future as business activities in different economies recover at varying pace,” said Desmond Tang, chief executive of Straits Real Estate. “The strength of our real estate portfolio with attractive recurring income and healthy operating yields will ensure that the group comes out of the pandemic stronger than before.”

CBRE and Colliers were marketing the Docklands  properties on behalf of the seller last year, based on the property firm’s website.

Straits said the acquisition will be financed by a mix of company resources and borrowings from the bank.

Record Year For Australian Offices

The announcement of the Melbourne acquisition on Friday underlines the appeal of Australian office assets as the country emerges from the pandemic and corporations beckon their teams back to the office.

Just last week, Hong Kong’s Link REIT announced its second Australian office investment buying a 49.9 percent stake in the Investa Gateway Office (IGO) venture, which holds a portfolio of assets in the central business districts of Sydney and Melbourne, from Canada’s Oxford Properties Group.

That commitment by Asia’s largest real estate investment trust follows the A$422.0 million that Singapore’s CapitaLand Integrated Commercial Trust Management Ltd (CICT) paid in December to acquire a half-stake in North Sydney’s 101 Miller Street office tower and the associated Greenwood Plaza retail development from Nuveen. That deal marked the Singaporean firm’s third Aussie office asset purchase within a month.

Another Singaporean player, Keppel REIT, also expanded its office portfolio late last year with its A$327.7 million purchase of the Blue & William office development currently underway in North Sydney.

A recent report by Real Capital Analytics showed that Australia’s commercial real estate market ranked as the second most active in Asia Pacific last year with an all time high transaction volume of $40.4 billion, trailing the $55 billion notched in China and surpassing Japan’s $38.6 billion total.