Propertylink and Partners Group team up to target value-add office investments

Propertylink has established an AUD500m (€325m) partnership with Partners Group, seeding it with an office building acquired for AUD150m.

Partners Group’s managing director, private real estate Asia, Rahul Ghai, said that given the attractive fundamentals and opportunities for value-add investment strategies, Australia is a key market for Partners Group’s real estate investment.

He said acquisition of 73 Miller Street in North Sydney, a secondary central business district to Sydney’s central business district, is supported by favourable underlying market fundamentals.

“On the one hand, rents in Sydney’s CBD have risen more than 30% in the past year, driving some tenants to search for more affordable office locations in other commercial districts, including North Sydney,” Ghai said in a statement.

“On the other hand, there have been substantial infrastructure upgrades in the North Sydney area, which have increased its connectivity.”

He credited Propertylink for its expertise in the acquisition and repositioning of office space, and added: “We look forward to working closely with them to reposition 73 Miller Street as a core asset, as well as on other transactions.”

Listed Propertylink will co-invest 15% of total equity in its new venture with Partners Group, known as Propertylink Australia Commercial Trust (PACT).

Stuart Dawes, Propertylink’s managing director and CEO, told IPE Real Assets: “In the first phase, our plan is to grow the partnership to AUD500m, then we will reassess the market and decide on the next phase.”

Dawes said the vehicle will seek to acquire similar value-add office investments in Sydney, Melbourne and Brisbane.

Asked if prices had risen too far to be able to extract value from Australian assets, Dawes said: “That is why you need to have people on the ground, to seek out opportunities to acquire buildings which require value-adding. We are not competing for new shiny towers.”

Dawes said the North Sydney office tower was originally held in a single asset trust, known as the Propertylink Office Partnership, set up with a Chinese investor, Fosun, three years ago.

In this latest deal, the Australian company will provide liquidity to Partners Group to buy out Fosun’s interest.

Partners Group currently has infrastructure assets and has also invested in the industrial/logistics sector with LOGOS.

The sale of 73 Miller Street realises an IRR of 14% for Fosun – it has outperformed the targetted return of 10% (both ungeared).

Dawes said having Partners Group as a new investment partner provided Propertylink with strong growth opportunities focussed on the creation of core institutional grade assets in the office market.