Singapore-listed Keppel REIT has purchased a grade-A office development in North Sydney for $327.7 million in a bid to expand its Australian footprint.
Lendlease is developing the Blue & William project, which is situated at 2-4 Blue Street and 1-5 William Street.
The asset will offer about 14,000 sqm of net lettable area and will be located 160m from the North Sydney train station and 350m from the upcoming Victoria Cross metro station.
Keppel REIT Deputy CEO and Head of Investment of the Manager Shirley Ng said the DPU-accretive investment reflected an initial net property income yield of 4.5%.
“The investment will also see Keppel REIT expand strategically into North Sydney, a major commercial district with positive leasing dynamics,” she said.
“Designed with tenant experience and wellness as a priority, Blue & William, which will include advanced green features and offer panoramic views of the Sydney Harbour Bridge, is set to be the preferred business address for corporates.”
The property will also feature outdoor terraces, an on-site café and end-of-trip facilities.
It has been designed to achieve the 5-star Green Star Design and As Built Rating by the Green Building Council of Australia, as well as the 5.5 Stars National Australian Built Environment Rating System (NABERS) Base Building Energy Rating.
The development is scheduled for completion in mid-2023, with the REIT receiving a regular coupon throughout the development phase.
Lendlease is providing a three-year rental guarantee on any unlet space after practical completion.
Strong leasing activity in North Sydney
North Sydney is New South Wales’ second-largest office market after the Sydney CBD.
It recorded its third consecutive quarter of positive leasing demand in 3Q 2021, with new and refurbished buildings continuing to be drivers of leasing activity.
The REIT said the market was well placed to absorb the current availability of stock and drive vacancy down, due to no new significant supply anticipated until 2024.
The completion of the new Victoria Cross Metro Station in 2024 will also enhance connectivity to North Sydney and support future demand in the market.
Once the property is completed, Keppel REIT’s assets under management will grow to S$9 billion across 11 properties in Singapore, Australia and South Korea.
Post-acquisition, Keppel REIT’s aggregate leverage will be approximately 39.9%.
The deal comes after Dexus exchanged contracts to sell a Sydney CBD office to Charter Hall’s prime office fund for $385 million last week.
