Swiss Re Selling Office Portfolio

Swiss Re Selling A$1b Office Portfolio In Sydney & Melbourne

AUSTRALIA – Multinational insurance provider Swiss Re Group plans to divest a commercial real estate portfolio that could fetch over A$1 billion, according to a recent report from realcommercial.

In fact, the conglomerate has appointed property consultancy JLL to advise it as it offloads a portfolio of office buildings in Melbourne and Sydney, plus some logistics facilities in Sydney’s western suburbs, as market sentiment improves.

The five-asset portfolio, which is being managed by AMP Capital, was supposed to be sold earlier this year but the plans were scuttled due to the health crisis. The insurance group is making another attempt to dispose the commercial properties after many office towers and industrial parks were sold recently at good prices.

The massive commercial property portfolio is expected to attract bids from across the globe and could see a combination of on- and off-market deals, as foreign investors chase after assets in Sydney and Melbourne, particularly those in the sought-after logistics segment, as well as high-end offices.

Moreover, AMP Capital is benefiting from robust market conditions. It recently divested 3 suburban office buildings at 1-5 Thomas Holt Drive in Sydney’s Macquarie Park to Singapore’s Ascendas REIT for A$288.9 million, which translates to a 17 percent premium over book valuation.

Although vacancy levels are increasing and low-grade offices come under pressure, the office sectors of Melbourne and Sydney are gaining from a number of major transactions involving premium office space, such as Dexus’ A$925 million sale of a 50 percent stake in Grosvenor Place to China Investment Corporation.

Swiss Re’s portfolio could be a good fit for diversified listed players such as Centuria Capital or Charter Hall. The properties could also be sold individually if this can achieve a higher valuation.

The commercial properties could also pique the interest of foreign investors, like those in Singapore which have been acquiring assets in Australia.

In 2017, the insurance giant entered Australia’s commercial real estate market by giving AMP Capital a broad mandate worth A$700 million to invest in core and value-add properties. Notably, AMP enhances the value of assets it manages by raising lease duration and repositioning buildings.

Specifically, Swiss Re acquired 32 Walker Street in North Sydney in late-2017 for A$74.75 million. The property changed hands at a 5.7 percent yield but is expected to sell at a tighter yield as the area has witnessed many transactions.
The insurance giant also bought 469 La Trobe Street in Melbourne for A$160.5 million. The tower measuring 19,864 sq m was recently renovated and is fully occupied.

Furthermore, the group picked up a 50 percent stake in 2 buildings at Sydney’s 50 and 60 Carrington Street for A$500 million. Strategically located in the vicinity of Wynyard station, the area is becoming more vibrant as Sydney’s transportation network is being enhanced, including the upcoming Metro network and light rail project.

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