Singapore’s sovereign wealth fund GIC has purchased the headquarters of Santos in Brisbane for a consideration of A$370 million ($281.4 million). The deal was done through Charter Hall Group and projects a yield of 5.7 per cent for the property.
According to a report by the Australian Financial Review, the 34,000sq m building at 32 Turbot Street Brisbane has a weighted average lease expiry of 3.7 years. Its previous owner was Permodalan Nasional Berhad (PNB), a corporate owned by the Malaysian government.
This transaction is the largest office deal in Brisbane for the year, despite the high vacancy rates in Brisbane’s central business district (CBD). The acquisition is seen as counter-cyclical on the part of GIC, which earlier this year, GIC announced its intent to invest close to A$1 billion ($761 million) into the Brisbane and Perth office markets.
This has seen the sovereign wealth fund (SWF) mandate listed funds management major Charter Hall and Perth-based Primewest to function as their domestic asset managers in Australia.
Tom Barr and Jason Lynch of Colliers International conducted a campaign to seek out international expressions of interst for the property.
In an interaction with the AFR, Barr explains: “Santos Place was the first highly competitive on-market test for Brisbane CBD prime-grade pricing benchmarks in the last two years. As we approach the end of the cap rate compression cycle, growth in asset values must now be supported by rental growth as there will be less of a free kick though compression.”
“Investors seeking counter-cyclical opportunities in the Brisbane prime-grade market are attracted to leasing exposure in the 2019-2021 window, given the favourable supply and demand forecast in this part of the market,” he adds.
Office assets in Brisbane are rarely traded, especially in one of the fastest growing cities in the world, which is driven by the strength of Queenland’s resource sector. Brisbane and Perth are set to grow faster than any other ‘mature’ world city over the next eight years, according to market analysts Jones Lang LaSalle in a report titled: A New World of Cities: Redefining the Real Estate Investment Map.
Given that the property markets of Perth and Brisbane are recovering from a slump, Charter Hall and Primewest will have to accelerate their dealmaking and further establish a portfolio of assets for the SWF.
Permodalan Nasional Berhad chose to offload the asset in a move to recycle capital. However, it also owns five office assets in London, including a 40 per cent stake in Battersea Power Station development, the Milton & Shire House, 1 Exchange Square, 90 High Holborn and Aviation House. Another asset it is divesting is in London is 1 Silk Street, home of Linklaters in London, for a consideration of about £400 million ($708.6 million).