Lendlease swoops on Swire House, Centuria triples its money on Sydney landmark

It went on the block in June this year, with expectations of at least $220 million.

The offering followed fast on the heels of major deals in Sydney, which had set sharp yields.

Among the underbidders for the Spring Street tower was Dexus, which bought a half-stake sale in the city’s tallest building, the MLC Centre for $722 million in June.

That Dexus deal was struck at on a very tight yield of 4.5 per cent. Earlier in the year, Malaysia’s second largest pension fund Kumpulan Wang Persaraan sold the Australian Securities Exchange headquarters at 20 Bridge Street on a 3.9 per cent yield.

The sale of Swire House to Lendlease’s powerful investment arm, Australian Prime Property Fund Commercial was foreshadowed earlier on Tuesday in Street Talk.

Savills Australia’s Simon Fenn, Graeme Russell and Ben Azar and INC Real Estate’s Josh Cullen and Rick Butler had been appointed to sell the 13,871-square-metre building.

Attractive for purchasers

Centuria’s chief executive unlisted property funds, Jason Huljich, said investors’ equity investment tripled over the four years in addition to their income return of 8 per cent per annum.

“We believed it would be attractive for purchasers looking to buy and hold the property, with a strong passing net income and the upside of fixed annual rental increases of around 4 per cent,” he said.

“In addition, the weighted average lease expiry is relatively short at around three years, offering the chance to capitalise on the strong demand for B-grade office space in the Sydney CBD when leases come up for renewal.”

For APPF, the purchase gives the unlisted fund access to a precinct well-served by transport.

“Other examples in line with this strategy include our investments in One Melbourne Quarter in Melbourne, and in Sydney, Darling Square and the International Towers at Barangaroo, all of which are world-class precincts well-positioned for success,” said Josh McHutchison, managing director of Lendlease’s Investment Management business.

This acquisition complements the fund’s adjacent holdings with its partners, including 1 O’Connell Street, 8 Spring Street, and strategic holdings in 23 O’Connell Street, he said.

The Spring Street deal comes amid a $1 billion wave of offerings now in the Sydney market.

Major campaigns to sell TH Real Estate’s 20 Hunter Street, Blackstone’s 1 Castlereagh Street and 231 Elizabeth Street are all due to close in the next few weeks.