Starwood Capital has entered Australia’s commercial property market with the purchase of an office block in an inner Sydney suburb for AUD160m (€104m), in partnership with Australian groups.

The US group formed a joint venture with Sydney-based boutique fund manager Arrow Property Investments to acquire the property in St Leonards from the Melbourne-based Wingate Group.

Arrow Property is in partnership with West Australian developer and fund manager Pindan Capital in the purchase. The asset will be managed by Arrow Property and Pindan Capital.

This is its second investment in Australia for Starwood Capital in as many months.

It formed a venture with a Melbourne developer in November to develop an AUD600m luxury hotel and apartment complex.

James Fogarty, Starwood Capital Group’s vice president, said: “We have targetted the Greater Sydney office market due to limited supply, growing demand and major infrastructure improvements currently under way.”

Fogarty said the St Leonard’s building appeals to a wide range of tenants, as evidenced by the strong existing rent roll.

“The floor plates allow us to provide space for varying tenant needs while also being competitively-priced for Sydney,” he said.

Kurt Wilkinson, co-founder of Arrow Property Investments, said the St Leonards precinct is poised for transformation, with significant government infrastructure spend including a second rail line.

In a statement, Kevin Colket, managing director of Starwood Capital Group, said: “We were drawn to the growing economy, positive demographics and transparent business environment in making our first (commercial) investment there in Sydney”

Starwood’s Melbourne venture is with the Melbourne-based Golden Age Group in development of the hotel/apartment complex on Spring Street in the central business district.

When announcing the hotel venture, Colket said the decision to work with Golden Age was due to a combination of market confidence and the reputation of that group.

“Melbourne’s hotel market achieves almost 90% occupancy, while demand continues to grow,” he said, referring to strong growth in tourism arrivals.

“We have already targetted a pipeline of potential properties in the major Australian markets and will make additional investments over the near term,” he said when announcing the Sydney investment.