Propertylink has sold a Sydney office building jointly owned with Goldman Sachs and Grosvenor Group for AUD275m (€183m).

The sale of 320 Pitt Street to ARA Australia and Straits Real Estate has generated a capital of 37.5% during the two years of ownership.

The building was bought in 2011 by the US-based Commonwealth REIT, controlled by property tycoon Sam Zell for AUD193m. It was then sold to Propertylink in June 2015 for AUD200m.

Stuart Dawes, managing director and CEO of Propertylink, told IPE Real Estate, the asset was sold for the simple reason that there is a strong demand from global and domestic investors for Australian assets.

“There is a lot of capital seeking to place in assets in Australia, but there is not much available,” he said.

ARA and Straits Real Estate, both Singapore-based companies, made an unsolicited approach to the owners.

Dawes said that when Propertylink bought the building it had a complex set of leases. The main tenant, Telstra, Australia’s largest telecoms company, had three separate leases – each with its own set of options.

“We successfully negotiated with Telstra to remove all the options, and this means that, by 2020, the new owners will be able to renegotiate a new deal with Telstra or have a vacant building, providing an opportunity to reposition it.”

The building is held in the Propertylink Office Partnership II (POPII), majority-owned by Goldman Sachs and Grosvenor. Propertylink has a 5% co-investment in the single-asset vehicle.

The sale price represents a 12.2% premium to current book value and realises an internal rate of return of 40% – against a 15% target for POPII.

Dawes said both Grosvenor and Goldman Sachs have other investments with Propertylink, and are keen to invest further in Australia.

“We have a long-term relationship with both our partners and we are constantly looking for opportunities,” he said. “But, first, we have to make sure it is the right deal.”

In April, Propertylink and Goldman Sachs bought an office building in Brisbane CBD for AUD145m.