RealIS Acquire Surry Hills Office for $97m

15 December 2020

RealIS is buying two adjoining office buildings in Surry Hills from private developer Cornerstone Property Group for $97m.

Cornerstone had acquired the assets in 2014 and completed a significant repositioning program including ~$25 million of CapEx to create one of the most prime office asset offerings in Surry Hills.

The two assets provide 6,951sqm of office space with large typical floor plates of 710sqm. The buildings are leased to 14 first generation tenants, 76% with a mix of ASX listed, national or global businesses. The asset has a WALE of 2.81 years and provides a fully leased net market income of $6million per annum which reflects a 6.2% fully leased yield.

The property has 49 secure basement car parks and an end of trip facility. The 10 Waterloo Street asset also has a 5 star NABERS rating.

JLL and IB Property ran an on market campaign in June following an early level of unsolicited interest.

The assets fundamentals, together with its scale for the sub-market, core Surry Hills location, exposure to technology tenants and proximity to Central Station were key attractions for investors with nine first round bids being received throughout the process, equating to c. $760 million of unsatisfied purchaser demand.  

Active capital mostly originated from European, Singaporean and domestic capital sources, whilst offshore groups without local offices navigated travel restrictions by reviewing virtual inspections, comprehensive underwriting materials and employing local consultants where required.

During the sales process, seven leasing deals were completed in the asset which averaged a 23% uplift from the previous passing rent, underpinning investor confidence in the performance and resilience of the asset.