Leighton Properties has raised $413.19 million through the sale of its 177 Pacific Highway project in North Sydney to the Singapore-based Suntec Real Estate Investment Trust, but Leighton will keep the lease as its new headquarters.
The 30-storey, 40,000-square-metre tower is the first major redevelopment in North Sydney for six years and comes at a time when the area's office vacancy rate has stabilised at about 10 per cent.
The area has been targeted by residential developers who are converting older-style offices into apartments, which has helped keep a lid on rising vacancy rates.
These include the US giant Blackstone, which bought 90 Arthur Street this year as part of the GE Capital portfolio.
Its directors said at the time they would look to upgrade the building and lease it as offices, rather than convert it to apartments.
The 10,000 square metres not occupied by Leighton was under review by agents to a variety of advertising agencies and local businesses.
Leighton Holdings chief executive Hamish Tyrwhitt said the interested parties were Australian-based super funds and private equity developers and cashed-up international funds.
The sale to Suntec REIT, Singapore's second largest listed REIT by assets under management, marks its entry into Australia where it joins its peer, the Singapore-based KREIT, managed by the Keppel Group.
KREIT owns 77 King Street and a 50 per cent share of 8 Chifley Square with Mirvac.
"The project will be developed by Leighton Properties and built by Leighton Contractors, an example of how the collaboration of Leighton Group companies generates value for clients, strategic partners and shareholders," Mr Tyrwhitt said.
Leighton Properties managing director Mark Gray said: "The project will be underwritten by the Leighton Group, which will take a head lease over 76 per cent of the office space. The remaining 10,000 square metres will be available to other corporates, meeting a demand in the North Sydney market that is experiencing record low vacancy rates."
He said it would be an efficient and flexible design that was targeting 5-Star Green Star and 5-Star NABERS levels for the building.
Suntec REIT chief executive Yeo See Kiat said the 177 Pacific Highway property was a strategic fit with Suntec REIT's portfolio of high-quality commercial assets.
"We are excited about partnering with Leighton on this project, which will be their corporate headquarters in Sydney," Mr Yeo said. "We look forward to its completion in early 2016."