Asia-Pacific REIT Takes Half Stake in Mirvac Sydney Office

The acquisitive Keppel REIT has taken a half-stake in a Grade-A Sydney office building. 

An Asia Pacific investment manager with $9-billion portfolio of properties in Singapore, Tokyo, Perth and Seoul, Keppel acquired its stake for $363 million, highlighting its “excellent” ESG credentials.

The Singaporean company now holds 50 per cent of Mirvac’s freehold 255 George Street.

Tenants in the 29-storey tower include the Australian Tax Office and the Bank of Queensland. 

The remaining interest will be retained by Mirvac Funds Australia, trustee of the Mirvac Wholesale Office Fund I.

The building has a total net lettable area (NLA) of 38,996sq m, comprising 38,805sq m of office space and 191.8 sq m of retail space, as well as 188 car parks.

“With the [area’s] positive office market outlook and the property’s prime specifications, this acquisition will enhance the quality of Keppel REIT’s portfolio and we are confident that it will continue to attract companies looking for quality office spaces in Sydney,” Keppel chief executive office Koh Wee Lih said in a statement.

▲ Keppel has stakes in (from left) 8 Chifley Square, the 33-storey David Malcolm Justice Centre in Perth, and the Ocean Financial Centre, Singapore.

“Looking ahead, we will continue to seek opportunities within Keppel REIT’s portfolio for optimisation and capital recycling, while remaining disciplined in capital management, to capture opportunities with attractive total returns over the long term.”

The offices at 255 George Street are expected to generate a first-year yield that exceeds 6.0 per cent and a distribution per unit accretion (the amount of dividends a REIT investor receives for every unit they have in the REIT) of 1.4 per cent on a pro-forma basis.

Despite office valuations taking a nosedive during the past year, the prime end of the market has proven more resilient and is proving more attractive to long-term investors.

According to JLL, Sydney’s Core Precinct, which includes 255 George Street sits, had an all-grade office vacancy of 11.5 per cent in the last quarter of 2023, the lowest of the four Sydney sub-markets.