Blackstone exits Perth office block for small return

Powerhouse private equity player Blackstone has scraped a meagre capital return from a small Perth office block it sold for a little over $18 million after acquiring it from GE five years ago.

Singaporean-based Firmus Capital bought the 10-storey office block at 14-16 Victoria Avenue for $18.19 million in a deal brokered by Knight Frank’s Nick Charlton and James Baker and Savills’ Barney Dear.

Blackstone acquired the property for $16.6 million in 2015 from GE, which had itself bought the office tower for more than double that in late 2007, just as the global financial crisis hit.

The private equity giant had also bought another office building from GE two years earlier, paying $24 million for the curved office tower at 8 St George Terrace. Blackstone chalked up a hefty capital loss when it sold the St Georges Terrace building to Quintessential Equity in late 2018 for just $9.25 million.

It had more success with its exit from 226 Adelaide Terrace two years ago, an office building it sold to John Bond’s Primewest for $86 million after acquiring it for $54.6 million in 2017.

Nevertheless, Blackstone’s trading in Perth’s office market – the vacancy rate is the country’s highest at 20 per cent – remains small beer compared to its efforts elsewhere, lodging an $8 billion bid for Crown Resorts and its portfolio of high-profile hotels this week and pursuing a dual-track process to sell off or float a $3 billion-plus portfolio of industrial assets.

Firmus Capital, the buyer of Blackstone’s latest Perth divestment, owns a number of neighbourhood retail and commercial offices in Australia and has recently overhauled the Altone Park shopping centre at Beechboro in Perth.

“The acquisition is at an attractive capital value, which was negotiated with the institutional seller during the pandemic period, and is in line with our value-add strategy,” it said.

Knight Frank’s Mr Charlton said the Victoria Avenue transaction was significant for the Perth market as it was one of the larger deals so far this year.

“Post COVID, value-add properties have seen significant challenges on achieving vendor expectations on pricing as investors are becoming increasingly risk averse and are typically applying substantial discounts to any form of vacancy.”