French luxury fashion brand Hermes has emerged as the buyer of the retail stratum of the Sydney CBD’s heritage Trust Building, in a deal struck through private equity firm Qualitas’ first Opportunity Fund.
The deal is understood to have closed at $105 million and the property will become home to Hermes’ flagship Sydney store.
The success of that deal, which was enabled by a full debt recapitalisation facilitated by the fund, has led to the launch of a second Opportunity Fund, Qualitas said.
Its first fund invests in property development and properties with repositioning opportunities across various property sectors through the use of equity, joint-venture equity, preferred equity and mezzanine debt.
In the case of the Trust Building, Qualitas first Opportunity provided debt assistance to the private owner of the four retail floors at the 12-storey Trust Building at 155-159 King Street for a refurbishment two years ago.
The retail stratum sits below higher floors of privately owned office strata units.
At the time, the Qualitas funding allowed the retail owner to continue to refurbish and keep up lease negotiations with Hermes to set up shop at the iconic building, both significant in its history and in its location at the crossroads of several high-end retail brands including Dior, Chanel and Bulgari.
The Australian Financial Review foreshadowed the lease deal that was also eyed by another another luxury brand, Valentino.
Those lease negotiations eventually led to a sale to Hermes.
“We liked the property from the start and felt we could materially assist the owner achieve their objectives by stabilising the capital structure and agreeing an appropriate development and business plan for the property,” Qualitas managing director Andrew Schwartz said.
“We are very proud to have had an involvement in delivering a world class retail flagship for one of the best known and respected luxury retailers in the world.”
Since the deal, Qualitas has raised another $100 million from institutional and wholesale investors for its second Opportunity Fund, with a target of $500 million. Like its predecessor, the second fund will also invest in opportunistic real estate investments across all property sectors.
The second fund is however being launched at an “inflection point” in the Australian economy where it can fund unique opportunities among real estate owners who are not able to commence their projects or acquisitions due to changes in the market such as housing softness, Mr Schwartz says.
The two interest rate cuts – and a third on the way – will also mean assets with long-term rental income that continues to rise above inflation will become more attractive purchases, Mr Schwartz said.
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