100 Market Street is the office portion of the Westfield Sydney complex (Image: Westfield Centres)
Hong Kong’s Link Real Estate Investment Trust has agreed to sell a 50 percent stake in 100 Market Street, an office tower in central Sydney, to Aware Super for A$225.9 million ($158 million), as Asia’s largest REIT presses ahead with a campaign to trim its overseas office holdings.
The Hong Kong-listed trust disclosed in a filing after trading hours on Tuesday that two of its Australian subsidiaries have signed agreements with a vehicle owned by the Australian pension fund to sell half of the units and shares in the entities holding the 10-storey, 28,339 square metre tower in a deal which values the entire property at A$451.75 million.
The price marks 33 percent markdown from the A$683 million Link paid Blackstone for the same tower in December 2019, when the acquisition marked the trust’s first push beyond Greater China, and falls short of the more than A$500 million that Sydney brokers were floating for the asset when Aware Super’s interest in the property first surfaced in local media in May.
“We are going back-to-basics to focus on our strength in owning and managing retail assets in Asia Pacific,” John Saunders, Link’s chief investment officer John Saunders said in a release, adding that the trust would use proceeds from the sale for unit buybacks and reinvestment in its retail portfolio.
The disposal extends a run of overseas exits for Link, which has been shedding assets from Singapore to the UK to fund unit buybacks and redeploy capital into its core Asian retail portfolio as its distributable income comes under pressure.
Central Sydney Tower
100 Market Street is a 10-storey, A-grade tower with 28,339 square metres (305,000 square feet) of net lettable area, built into the Westfield Sydney complex that also includes the Sydney Tower and two neighbouring office buildings on Castlereagh Street.
John Saunders, executive director and chief investment officer of Link REIT’s manager (Image: LAML)
Three tenants fill the building: Scentre Group, the ASX-listed operator of the Westfield network and the tower’s former owner; ASIC, Australia’s corporate regulator; and the Future Fund, the country’s sovereign wealth fund.
The property carries a 5.5-star NABERS Energy rating and sits on a leasehold site which has around 292 years remaining to its property rights.
Link is selling the stake through two separate but linked agreements. Link Australia Holdings Pty Ltd is offloading half the units in Market Mid Trust, the vehicle that holds the property, while a second Link entity, Joy Success Developments Limited, is selling half the shares in the trust’s corporate trustees.
The two linked deals require clearance from the Australian Competition and Consumer Commission, which is expected within six months of signing, with a possible three-month extension. Link’s Australian press release estimates that the deal will complete in the third quarter.
The A$225.9 million price tag equals half of CBRE’s appraised value for the tower, A$451.75 million as of end-May. After roughly A$3.1 million in expenses, Link expects to pocket net proceeds of about A$222.7 million. The sale nudges Link REIT’s pro-forma debt-to-assets ratio up marginally, from about 25.6 percent to 25.8 percent.
Link will lose majority control of the property once the deal closes, however, its Australian management arm keeps running the building under a new management agreement, and the two sides will oversee the asset jointly through a four-person board split evenly between them, with unanimous consent required on major decisions.
From Blackstone Buy to Office Retreat
Link paid Blackstone-managed funds A$683 million for 100 Market Street in December 2019, completing the purchase in April 2020. The deal was the trust’s first acquisition outside Greater China.
Then-CEO George Hongchoy pitched it as the start of a broader diversification push, targeting up to 10 percent of Link REIT’s assets in gateway markets including Australia, Singapore, Japan and the UK. Around the same time, Link picked up a 50 percent stake in three Sydney retail assets — Queen Victoria Building, The Strand Arcade and The Galeries — for A$538.2 million.
That expansion has since gone into reverse. With property income under pressure, Link has been selling down overseas holdings, including Swing By Thomson Plaza in Singapore. CIO John Saunders has cast the pivot as a “back-to-basics” focus on retail assets across Hong Kong, mainland China, Singapore and Australia.
Link had quietly shopped the Market Street stake since February, with Cushman & Wakefield and Knight Frank running the process, before The Australian first reported Aware Super’s interest in May. Link’s Sydney retail holdings — Queen Victoria Building, The Strand Arcade and The Galeries — are untouched by the sale.
Aware Super’s Office Push
The deal cements Aware Super as one of the more active buyers of Australian office space, at a moment when big local capital is returning to the sector. Aware Real Estate, the roughly A$2.5 billion platform that manages the fund’s directly held property, already owns 145 Ann Street in Brisbane and 207 Pacific Highway in St Leonards. Its parent fund oversees a property book of around A$16 billion.
Aware had earlier been in talks to take a 75 percent stake in Lendlease’s Victoria Cross Tower in North Sydney, before switching its attention to Market Street.
The transaction joins a run of large office trades pointing to renewed institutional appetite for Sydney’s premium towers, even as broader vacancy stays elevated. CSC doubled its stake in Grosvenor Place to 50 percent last year alongside new partner GPT Group. Singapore’s OUE REIT paid A$357 million for a 19.9 percent stake in Salesforce Tower.
Link will retain a 50 percent interest in 100 Market Street and continue managing the building under the terms of the new agreement.