Blackstone seals $826m Mirvac deal

US private equity giant Blackstone has staked its claim as a major force in the Australian property market with the purchase of its largest portfolio in an $826 million deal with listed player Mirvac Group.

Mirvac yesterday unveiled the sale of a half stake in landmark Sydney office building Westpac Place as part of the broader deal with Blackstone, which was sweetened with seven additional non-core assets from its property division.

Mirvac chief executive Susan Lloyd-Hurwitz said the transactions were key capital management initiatives for the group, which will pour the proceeds into its high-returning office and apartment developments.

“We are delighted to have entered into an agreement for the sale of 50 per cent of 275 Kent Street, Sydney, and to have secured another high quality capital partner in Blackstone to sit alongside Mirvac in one of our key strategic assets,” she said.

An affiliate of Blackstone Real Estate Asia forked out $435m to buy the tower stake at a premium to book value as part of the larger deal foreshadowed by The Australian.

Blackstone has also been granted independent call options over a portfolio of seven of Mirvac’s non-core assets for an acquisition price of $391.4m.

“The call option agreements for seven non-core assets have allowed us to accelerate our strategy to exit secondary assets with no development potential, while minimising transaction costs,” Ms Lloyd-Hurwitz said.

Once finalised, Mirvac’s portfolio will be heavily weighted towards core assets and it has been chasing other large office towers and shopping centres on offer.

Mirvac’s agents — Josh Cullen and Michael Andrews of CBRE and Rob Sewell, Paul Noonan and Simon Storry of JLL — cited the deal as setting new benchmarks in the market.

The CBRE pair noted the strong interest from offshore groups in Westpac Place that sold on a passing yield of 6.65 per cent, with the interest likely to be repeated for other assets that are on the block. The JLL trio also tipped further significant towers in Sydney’s CBD would change hands as the two firms are also marketing QIC Real Estate’s $500m tower at 52 Martin Place.

However, Blackstone’s opportunistic purchase of a series of non-core assets from Mirvac and the listed group’s hefty $156m in vendor financing were the most remarkable aspects of the $826m deal. These include the nearby $69.4m 1 Castlereagh Street in Sydney, as well as two office assets in Queensland that are worth nearly $70m.

Two industrial assets in North Ryde worth $72.7 million are also being sold part of the deal.

The Australian last week revealed the sale would include the $139.5m Waverley Gardens Shopping Centre in Melbourne.

Blackstone head of real estate Asia, Chris Heady, said the transaction underscored the group’s long-term commitment to investing in the Australian real estate market, but there is already talk that Blackstone could look to trade parts of the portfolio as it shoots to hit high return hurdles.