Link REIT buys 100 Market from Blackstone

Link REIT buys 100 Market from Blackstone

27 December 2019

Australia’s newest commercial property player, the $31 billion Hong Kong-listed Link REIT has acquired 100 Market Street in Sydney from Blackstone for approximately $683 million, at a record tight net yield of 3.9 per cent.

“The property is a stable and quality asset. The acquisition will drive growth in sustainable income and capital value, with limited downside risk,” said Link Chief Executive Officer George Hongchoy, adding, “A more diversified portfolio with overseas properties providing new sources of income will help ease our reliance on Hong Kong properties to generate income progression, and contribute to a healthier growth trajectory.”

100 Market Street is a premium building surrounded by Market, Pitt and Castlereagh Streets in Sydney’s midtown precinct. The building has a total net leasable area of 28,385 square metres spread over 10 storeys and was substantially redeveloped in 2010/11 as part of the larger Westfield Sydney redevelopment.

100 Market Street is currently fully occupied by three blue-chip tenants, including the Australian Taxation Office and Scentre.

The building has a weighted average lease expiry (by rental income) of 8.45 years with leases expiring between 2027 and 2030, and a net passing income of approximately $26.7 million per annum as at 16 December 2019.

The transaction marks Link’s first acquisition outside of Hong Kong and Mainland China and the start of its diversification plans. While Hong Kong will remain Link’s home and core market, Link has stated that it will incrementally increase its exposure in Mainland China and the gateway cities of other major developed markets, such as Australia, Singapore, Japan and the UK, due to their relative market stability and liquidity, as well as transparent regulatory environments.

However, Link does not have immediate plans for divesting existing assets. Along its growth trajectory, Link expects Hong Kong assets will account for 70% to 75% of its total portfolio value, Mainland China assets for no more than 20% and overseas assets for no more than 10%.

In terms of asset class selection, Link expects it will continue focusing on retail assets, with office assets accounting for 15% to 20% of its expanded portfolio.

The acquisition represents approximately 1.66% of the total assets of Link REIT, with Link funding the transaction through a combination of external bank loans secured by a mortgage over the building and Link’s internal resources.

Link will continue to engage Scentre Shopping Centre Management Pty Ltd as property manager upon completion of the transaction.

JLL and Cushman & Wakefield handled the deal.