Singapore’s GIC Buys Brisbane Tower for $281M

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Lee Kok Sun, Chief Investment Officer, GIC Real Estate

Singaporean sovereign wealth fund GIC has taken on Brisbane’s biggest office deal of the year by purchasing a downtown office tower for A$370 million ($281 million) in the northern Australian city.

GIC, which has an estimated $359 billion in assets under management, is buying the 41-storey Santos Place tower from Malaysian fund management company Permodalan Nasional Berhad (PNB), according to an account in the Australian Financial Review.

The rare deal for a prime, downtown office asset represents an investment yield of 5.7 percent, according to the report, and forms part of a strategy by the Singaporean giant to invest up to $800 million in the subdued office markets of secondary cities Brisbane and Perth.

Brisbane Sees Biggest Office Deal Amid Signs of Recovery

Completed in 2009, the 35,395 square metre tower at 32 Turbot Street houses the headquarters of Aussie oil and gas producer Santos. The certified green building overlooks the Brisbane River near City Hall, within the core business district of the Queensland state capital.

Santos Place in Brisbane sold for $281 million

GIC purchased the building through ASX-listed property fund manager Charter Hall Group. PNB, which had acquired Santos Place for A$287 million in August 2010, hired Colliers International to conduct a global expressions of interest campaign for the property — said to be the first prime office asset in downtown Brisbane to be marketed since 2015. The campaign closed on October 20.

GIC mandated Charter Hall and Perth-based Primewest earlier this year to act as its domestic fund manager for an office acquisition gambit in Brisbane and Perth, targetting core and core-plus office properties in a bet on the long-term growth potential of the pair of cities.

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Brisbane, the third most populous city in Australia, recorded a high office vacancy rate of 15.8 percent in the central business district last quarter, according to a report by international brokerage JLL, although leasing demand for premium-grade space has shown signs of picking up.

A recent report by the Urban Land Institute (ULI) and PwC found that among secondary markets in Australia, Brisbane – together with areas along the Gold Coast – likely has the best prospects as an investment destination, due to improving fundamentals after a years-long slump; effective rents are projected to grow 16 percent in the year to 2018. The city is being reshaped by over $12 billion of major infrastructure projects, helping to drive interest in commercial properties.

The outlook is cloudier for Perth, Australia’s fourth-biggest city, where investment opportunities are limited despite the fact that rents may have touched bottom after a long slide. The same report found that real estate professionals ranked Sydney and Melbourne as the first and second most promising investment markets in Asia Pacific, respectively, on the back of tight supply and surging rents.

GIC, ranked as the world’s eighth-largest sovereign wealth fund, already owns assets in Australia including the Chifley Tower and Queen Victoria Building in Sydney. The fund has announced over $10 billion in overseas real estate acquisitions by the firm or GIC-backed funds since August of last year.

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