Keppel REIT take on Thirdi North Sydney Development with Lendlease

Lendlease, together with Keppel REIT, have today exchanged contracts to acquire 2-4 Blue Street and 1-5 William Street in North Sydney from Third.i Group for development.

Lendlease will develop the new boutique office building, named Blue & William, acquired by Keppel REIT. The total development consideration is A$327.7 million, including $150m for the site.

Located on a 2,309-square-metre site on the corner of Blue and William streets, and with circa 14,000-square-metre NLA, the project will support Lendlease’s strategy to bolster and diversify its commercial development pipeline in North Sydney.

Ms Shirley Ng, Deputy CEO and Head of Investment of the Manager, said, “In line with our active portfolio optimisation strategy, this DPU-accretive investment brings an initial net property income yield of 4.5%, which will enhance Keppel REIT’s overall portfolio returns. At the same time, regular coupon will be received throughout the development phase, providing robust risk-adjusted returns.

“The investment will also see Keppel REIT expand strategically into North Sydney, a major commercial district with positive leasing dynamics. Designed with tenant experience and wellness as a priority, Blue & William, which will include advanced green features and offer panoramic views of the Sydney Harbour Bridge, is set to be the preferred business address for corporates.”

North Sydney is New South Wales’ second largest office market after the Sydney CBD, and a location of choice for diverse industry sectors including technology, media and telecommunication, as well as the professional services and insurance sectors.

Notwithstanding the pandemic, North Sydney recorded its third consecutive quarter of positive leasing demand in 3Q 2021, with new and refurbished buildings continuing to be drivers of leasing activity. With no new significant supply anticipated for North Sydney until 2024, the market is well placed to absorb the current availability of stock and drive vacancy down.

The completion of the new Victoria Cross Metro Station in 2024 will also enhance connectivity to North Sydney and support future demand in the market. 

Offering a total net lettable area (NLA) of about 14,000 sqm, the property sits at the prime intersection of 2-4 Blue Street and 1-5 William Street, and is 160m from the North Sydney Train Station. With the upcoming Victoria Cross Metro Station, which will be located about 350m from the property when completed, commuting time to Barangaroo and Martin Place in the Sydney CBD will be reduced to approximately three minutes and five minutes respectively.

Designed by leading global architecture firm Woods Bagot, Blue & William will feature outdoor terraces overlooking the Sydney Harbour Bridge, as well as an on-site café and end-of-trip facilities. In line with Keppel REIT’s commitment towards sustainability, the property is designed to achieve the 5 Star Green Star Design and As Built Rating by the Green Building Council of Australia, as well as the 5.5 Stars National Australian Built Environment Rating System (NABERS) Base Building Energy Rating. In addition, it will incorporate smart building technologies such as destination control lifts and motion detection lighting control systems. The developer of the property, Lendlease, is a globally integrated real estate and investment group headquartered in Australia.

The acquisition is targeted to be completed in end-2021, with practical completion of the development estimated in mid-2023. A three-year rental guarantee will be provided by Lendlease on any unlet space after practical completion.

As originators of Blue & William, the Third.i Group has consolidated the development site and worked with global architecture and design studio Woods Bagot to design the 10-storey building, which commenced construction in 2021. Lendlease will now see the development through to completion, scheduled for 2023.

Tom Mackellar, Managing Director, Lendlease Development said “This strategic acquisition supports the diversification of our commercial product offering and unlocks prime floorspace for our customers in North Sydney.

The future of office has been reimagined, but remains strong, with a greater emphasis on flexibility and product diversity. The Blue and William development will cater for our customers looking for high-quality office design on a smaller scale.”

Scott Mosely, Managing Director, Lendlease Investment Management said “We look forward to working with Keppel REIT as our new investment partner. Our investment mandates have grown significantly over the last few years in the office sector as there continues to be strong demand from investors for high quality, sustainable and flexible office assets in desirable locations.

“These assets, with a focus on wellbeing, will help corporate customers attract and retain talent.”

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About Warwick Petschack

Warwick has over 25 years of property investment and management experience. Principally responsible as Managing Director for Capital Management Australia and Joint Managing Director for Chauvel Capital Partners and Editor of Australian Property Markets News.

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