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Sydney city landmark set for a $75 million refit

August 10, 2018

Impression of the new-look retail and office podium at 388 George Street, Sydney. Photo: FJMT Architects

A landmark Sydney building that once claimed to be home to the nation’s biggest office suite is going to get a substantial facelift.

The redevelopment of IAG House at 388 George Street will see a new retail and office precinct built on the corner of King Street.

The building’s owners Investa Office Fund and Brookfield have lodged development plans to overhaul the former NRMA headquarters, which was once said to have had the largest office suite in the country, occupied at times, by its then president, Nicholas Whitlam.

The 28-storey tower was previously known as the American Express building, then NRMA and now IAG House, was completed in 1976 and refurbished in 1998 and 2009. The property comprises basement and ground floor retail, being a Coles supermarket, the office accommodation and on-site parking for 80 vehicles.

Under the plans, a new five-storey retail and commercial podium with a roof top bar will be built on the under utilised forecourt. Alex Alamsyah of Knight Frank is conducting the retail leasing campaign, while CBRE is looking for new office tenants when IAG relocate to Darling Park Tower 2.

Penny Ransom, IOF fund manager said there has been leasing progress with non-binding heads of agreement over 8,024 square metres of 22 per cent of the office component. There has been market speculation that First State Super is a possible new tenant.

IOF shareholders are due to vote on a takeover proposal from the US-based private equity giant Blackstone on August 21, which has been recommended for acceptance by the IOF independent directors.

If approved, the well-known 388 George Street site will be co-owned by two overseas-based investors.

The redevelopment plans come as IOF has reported a rise of 10.6 per cent rise in its statutory net profit to $521.6 million statutory for the year to June 30, boosted by property revaluations.

Funds from operations were down 0.8 per cent due to one-off divestments. The net property income was up 2 per cent, but taking out upcoming redevelopments of 388 George Street and 347 Kent Street, Sydney, it is forecast to be fall 1.8 per cent in the 2019 year.

IOF had guided towards a fall in the coming year in its takeover response documents, so the results were in line with market expectations.

”IOF has benefited from strong office market fundamentals, particularly in Sydney, North Sydney and Melbourne. Major leasing transactions and the delivery of IOF’s development at Barrack Place were also key drivers of performance for the year,” Ms Ransom said.

”Funds from operation guidance for the 2019 year is 29.2¢, down 4.6 per cent on 2018. Fixed rental increases and positive leasing fundamentals in Sydney are anticipated to be offset by the expected sale of 836 Wellington Street and vacancy at 388 George Street and 347 Kent Street while the refurbishment of these two properties is
undertaken.”

The annual distribution is 20.3¢ with the final of 10.15¢ being paid on August 27.

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