The Perth tower that Alan Bond built is a steal for Lendlease at $340m
Lendlease has joined forces with boutique investment manager Realside to acquire a St Georges Terrace skyscraper in Perth for $339.75 million from Brookfield, a move that signals how value-add style investors are setting the pace in the market.
The purchase of the 51-storey tower is the third such deal for Lendlease’s Real Estate Partners 4 fund, a $1.5 billion fund put together last year with a view to seizing opportunities in a disrupted market.
Lendlease seeded the REP4 fund this year with a $391 million acquisition of the “Blue Tower” in Brisbane’s Creek Street, in partnership with Marquette Properties.
That transaction was followed in September by a $300 million move on two towers in central Melbourne, including one on Collins Street, held by the Rich Lister Werdiger family.
The close-ended Lendlease fund has a 10-year fixed life. Its strategy is to pick up existing assets that can generate income, while repositioning and refurbishing them, with an eye to the upside that could potentially flow from further planning and even change of use.
“This is a great acquisition for the REP4 portfolio,” said Paul Snushall, head of private equity for Lendlease Investment Management.
“In line with our recent Blue Tower acquisition in Brisbane and Collins Street acquisitions in Melbourne, we’re keen to enhance 108’s ground plane and end-of-trip facilities, along with creating quality fitted suites to deliver a superior product for current and future tenants.”
The investment numbers underlying that thesis are set out in a fund-raising offer for sophisticated investors which was launched in September by Lendlease’s partner in the deal, Sydney-based Realside. It is expected Realside will take up about one-third of the investment.
Investors in the Realside fund are forecast to receive average annual cash distributions of 7.9 per cent, and an 11.7 per cent internal rate of return over five years.
The Realside fund-raising offer also makes clear its strategy is to “take advantage of short-term market mispricing” to acquire the Perth tower at what it describes as “a highly attractive price relative to recent comparables”.
On Wednesday, Realside Financial Group’s founding partner, Mark Vonic, said: “Realside’s purchase of 108 [St Georges Terrace] is an example of our approach to seeking out opportunities that provide our clients access to core assets that provide attractive returns.”
Developed by Alan Bond in the 1980s, the 38,000 square-metre tower has a list of blue chip tenants, including ASX-listed miner South32, pan-Asian officer provider The Executive Centre, lender Pioneer Credit, and law firm Norton Rose Fulbright.
The St Georges Terrace property includes the three-storey, heritage-listed Palace Hotel, built in 1897, which provides offices, cafe, restaurants and multiple conference facilities.
