1 Farrer Place is a Sydney landmark, comprising the Governor Macquarie and Governor Phillip towers.

Lendlease boosts base with $584m landmark office complex

Carolyn Cummins|Dec 02, 2020

Lendlease has boosted its asset portfolio with the purchase of a 25 per cent stake in Sydney’s landmark 1 Farrer Place office complex for $584.6 million from co-owner GPT in a deal that defies the current conditions in the pandemic-hit market.

The deal was done by the Lendlease-run Australian Prime Property Fund Commercial (APPF Commercial) at book value on a sharp yield of 4.9 per cent, which sets a benchmark for another round of sales coming into the new calendar year.

JLL’s head of capital markets in Australia, Fergal G Harris says the final months of 2020 have seen strong capital markets activity for the Australian commercial property market, with almost $1.5 billion in deals negotiated in one week.

“The large deal activity … now brings total sales volumes for the entire commercial market in Australia to $13.63 billion. This compares to $36 billion in 2019, when Australian commercial volumes reached an all-time record high,” Mr Harris said.

Mr Harris estimates the pipeline of assets going into the final month of the year is estimated at about $2 billion.

Under the latest sale Lendlease’s APPF Commercial exercised its first right of refusal and bought the additional 25 per cent interest in the complex – comprising the Governor Phillip Tower and Governor Macquarie Tower – in what is considered Sydney’s CBD financial district.

Lendlease’s APPF Commercial will now own a half share with long-time co-owner Dexus. It comes two weeks after Dexus sold its half share in the Harry Seidler-designed Grosvenor Place office tower at 225 George Street, Sydney to China’s sovereign wealth fund for $925 million.

Micah Schulz, fund manager, APPF Commercial, said 1 Farrer Place will also benefit from significant additional private and public investment in the immediate precinct, including nearby metro station developments.

For GPT, the cash will be reinvested into new opportunities including logistics acquisitions and the group’s development pipeline. GPT CEO Bob Johnson said that will generate “superior long-term returns for investors”.

Last week, GPT also exchanged contracts for the purchase of three prime logistics properties and 2.35 hectares of adjoining development land at Drystone Industrial Estate, Truganina, Melbourne for $127.6 million. Settlement is expected to be completed by mid-December.

Grant Berry, AREIT portfolio manager, said the recent positive news of a vaccine has been a wake-up call for commercial property markets and it will have an impact on the office sector.

He said there will be a return to demand towards the office and a tailwind for the retail sectors, as well as areas such as hospitality and tourism.

“In Australia, we’ve already gone beyond ‘COVID-normal’ and the market transition triggered by news of an effective vaccine is only just getting started,” Mr Berry said.