Funds lead interest in BlackRock office assets

PRIVATE property syndicates and small- to medium-sized

By InvestSMART · 7 Nov 2012

By InvestSMART ·
7 Nov 2012

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PRIVATE property syndicates and small- to medium-sized superannuation funds are in the process of due diligence over more than $300 million worth of prime national office assets being sold by the private equity group BlackRock.

The sales campaign for the assets closed last Friday and prospective buyers have 20 days to register an offer.

The outlook for the office market is improving, albeit at a slow pace. Leasing has also shown signs of life, with several deals being signed this year.

The office portfolio includes

10 Barrack Street, 166 Epping Road and 107 Pitt Street, all in Sydney 555 Lonsdale Street, Melbourne, and the Austar building at Robina on the Gold Coast.

The 10 Barrack Street property is valued at $60 million, and is believed to appeal to funds such as Abacus Funds Management and CorVal, among others.

In Melbourne, the 13-storey 555 Londsale Street property is valued about $65 million. Listed and wholesale funds are said to have put in offers, considering the property's proximity to the city's financial and legal businesses.

BlackRock has already raised $115 million through the sale of its industrial assets to Goodman Group. The group signalled in September that it was selling its $488 million Australian property portfolio, covering assets from Townsville to Perth. The funds raised will be used within other parts of the BlackRock business.

The selling agents for the Sydney CBD offices were Jones Lang LaSalle and Colliers International. Jones Lang LaSalle and Hartigan Bolt were the agents for the Epping Road property.

The demand was encouraging, with the buyers mainly comprising local super funds, private investors and syndicates. Real estate investment trusts and Asian investors were thought to be less involved in the campaign.

Details are also set to be finalised in the coming week for the sale of the $200 million Eclipse tower at 20 Station Street, Parramatta, to the REST Industry Super fund.

The building is owned and developed by Leighton Properties and Grosvenor Funds Management. It will be completed later this year and is already 80 per cent leased.

REST is among the largest super funds by membership, with more than 1.9 million members and more than $20 billion under management.

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Frequently Asked Questions about this Article…

What office assets is BlackRock selling in this Australian property campaign?

BlackRock is selling more than $300 million of prime national office assets, including 10 Barrack Street, 166 Epping Road and 107 Pitt Street in Sydney, 555 Lonsdale Street in Melbourne, and the Austar building at Robina on the Gold Coast.

Who are the likely buyers for BlackRock’s office assets and what types of investors are showing interest?

The campaign has attracted private property syndicates, small- to medium-sized superannuation funds, local super funds, private investors and syndicates. Listed real estate investment trusts and Asian investors appeared less involved, while specific funds such as Abacus Funds Management and CorVal are believed to be interested in assets like 10 Barrack Street.

What is the timeframe and process for making offers on the BlackRock office portfolio?

The sales campaign closed last Friday and prospective buyers have 20 days from that close date to register an offer as part of the due diligence and bidding process.

How is the Australian office leasing market performing and how might that affect buyers?

The outlook for the office market is improving slowly, with leasing activity showing signs of life and several deals signed this year, which may make some investors more confident about long-term income prospects from these assets.

What are the reported valuations for the key properties in the sale?

Reported valuations in the campaign include about $60 million for 10 Barrack Street in Sydney and about $65 million for the 13-storey 555 Lonsdale Street in Melbourne. The Austar building and some other assets were listed but specific values were not provided in the article.

Who are the selling agents handling the BlackRock office sales?

Jones Lang LaSalle and Colliers International were the selling agents for the Sydney CBD offices, while Jones Lang LaSalle and Hartigan Bolt handled the 166 Epping Road property.

What has BlackRock already achieved from recent Australian property sales and how will it use the proceeds?

BlackRock previously raised $115 million by selling industrial assets to Goodman Group. The group signalled it was selling a $488 million Australian property portfolio, and the funds raised from these disposals will be used within other parts of the BlackRock business.

What’s the status of the $200 million Eclipse Tower at 20 Station Street, Parramatta, and who is involved in that deal?

Details are set to be finalised for the reported $200 million sale of the Eclipse Tower at 20 Station Street, Parramatta, to the REST Industry Super fund. The building is owned and developed by Leighton Properties and Grosvenor Funds Management, is due for completion later this year, and is already around 80% leased. REST is one of Australia’s largest super funds, with more than 1.9 million members and over $20 billion under management.