QBE aims to net $40m as it makes a move

QBE Insurance could reap as much as $40 million as it prepares to sell its long-standing Pitt Street headquarters to consolidate its Australian business into one property.

The group's chief executive, John Neal, and the general insurer's finance and risk team was moving into the new 8 Chifley Square, while the remaining part of the business would move out of 80 Pitt and 85 Harrington Streets in coming years.

As part of the sale of 80 Pitt Street, a lease back deal would be offered to QBE until it found a new home for the consolidated business.

No price has been disclosed, but similar buildings have been sold for about $40 million.

The 15-level property has a net lettable area of 12,642 square metres and its art deco, heritage-listing is expected to appeal to a diverse range of buyer groups, including REITs, private buyers and offshore purchasers. Knight Frank and CBRE have been appointed as joint sales agents.

The pending sale comes as the Standard Life group is said to be in final due diligence in the divestment of assets including its office tower at 16 Spring Street, understood to be worth about $25 million.

Jones Lang LaSalle recorded $12.3 billion worth of office transactions (above $5 million) over the 2012-13 financial year. The year was characterised by several large deals more than $100 million (26 transactions).

Jones Lang LaSalle's Head of Office Investments-Australia, Rob Sewell said, "Most of the buyer groups for core product - A-REITs, domestic wholesale funds, superannuation funds and offshore investors - were engaged in the market at the moment."

Mr Sewell said strong demand for core product resulted in pricing tension and yield compression in the 2012-13 financial year.

"Yield compression was concentrated in modern assets with long-dated leases. We recorded about 25 basis points of compression at the tighter end of the yield range in the Sydney, Melbourne and Brisbane CBDs."

He added that new capital sources were emerging from offshore to supplement the competition for core CBD product. But there was a shortage of available assets to satisfy these mandates.

"We will see a number of investors willing to compromise on location for additional yield. Nevertheless, passive investors are unlikely to compromise on asset quality. As a result, the 2013-14 financial year will see greater liquidity in fringe and suburban markets for product with core characteristics," Mr Sewell said.