TH Real Estate sells Sydney office block at record yield to Hong Kong buyer

TH Real Estate has sold a Sydney office block for more than AUD190m (€126m) to a Hong Kong-based investor – capturing a capital gain of nearly AUD100m over four years.

The deal has been agreed on a yield of less than 4%, setting a new record for a Sydney office building. It comes five months after the sale of a 50% stake in the iconic MLC Centre, also in the city’s central business district, which traded at a 4.5% yield.

TH Real Estate and its agent INC RE declined to comment on the sale of the building at 20 Hunter Street, but IPE Real Assets confirmed the deal with a source close to the vendor.

The buyer is a division of the Hong Kong-based K Wah Group, which is investing in the Australian office market for the first time.

TH Real Estate, owned by US financial services group TIAA, acquired the 16-storey building for AUD96m in October 2013 from the Hong Kong-based CLSA Capital Partners.

The building was purchased at a fully-leased yield of 7.25%, nearly double the yield achieved in the latest transaction.

Speaking at an event in Sydney this week, Mike Sales, head of TH Real Estate, said: “We have been delighted with the buildings we have acquired in the Australian market in the last few years – in some cases in terms of sales realisation.”

He added: “We have benefitted from high yields, although that is dissipating with what cap rates have got to in the last three years. We have had terrific yield compression.

“However, there is still growth to be had in selected markets in Australia.”

Speaking at the same event, Nick Evans, TH Real Estate head of Australia, said the firm will continue to focus on the traditional core sectors of retail, office and industrial.

“We have capability in some of the alternative sectors, such as student housing and healthcare, which we are quite keen to explore,” he said.

“These sectors could help provide a little more yield as we perhaps enter a more defensive period of the cycle to help protect against a downturn.”

TH Real Estate also announced it was planning to launch a core, open-ended, pan-Asian real estate fund.