Keppel Reit to acquire 50% interest in Sydney office building for A$363.8 million

KEPPEL Real Estate Investment Trust (Reit) : K71U 0% has agreed to acquire a 50 per cent interest in a freehold Grade A office building in Sydney’s central business district (CBD) for A$363.8 million (S$321 million). 

The remaining interest for the property at 255 George Street will continue to be held by the seller, Mirvac Funds Management Australia, as trustee of Mirvac Wholesale Office Fund I. 

Keppel Reit’s manager on Monday (Apr 1) said the property is expected to generate a first-year yield that exceeds 6 per cent and distribution per unit accretion of 1.4 per cent on a pro-forma basis. 

The building has a total net lettable area of 38,996.8 square metres (sq m), including 38,805.0 sq m of office space and 191.8 sq m of retail space, as well as 188 car park lots. 

Key tenants of the space include the Australian Taxation Office and the Bank of Queensland, alongside others from the government, financial institutions, healthcare and information technology. 

As at Dec 31, 2023, the property had a committed occupancy rate of 93 per cent, with no significant lease expiries from 2024 to 2028. 

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Keppel Reit’s manager also noted that the property had stable cash flows underpinned by a weighted average lease expiry of 6.8 years.

Following the acquisition, Keppel Reit’s Singapore-centric portfolio will be worth approximately S$9.6 billion across 13 properties in the city-state, which would constitute 76.5 per cent of the Reit’s total assets under management (AUM). 

Other assets held by the Reit are in Australia (19.3 per cent of AUM), South Korea (3.3 per cent of AUM), and Japan (0.9 per cent of AUM). The Reit’s proportion of freehold assets in its portfolio will increase from 33.2 per cent to 36.4 per cent. 

The George Street acquisition builds on Keppel Reit’s existing partnership with Mirvac, as they already jointly own 8 Chifley Square in Sydney and David Malcolm Justice Centre in Perth.

Keppel Reit closed on Thursday up S$0.005 or 0.6 per cent at S$0.87.