Macquarie Bank won the rights to develop the over station precinct above the Martin Place Metro station in a controversial off market Unsolicited Proposal to the State Government paying $355m for the air rights to two towers.
Macquarie have been running a sales process for the south tower which has attracted interest from the domestic heavy weights including Charter Hall, CBUS, Dexus and ISPT, however it appears that ISPT have led the charge across the line in what is likely to be a $900m+ deal.
The 28 storey commercial tower with a nine storey podium will provide 37,553sqm Gross Floor Area including 1,222sqm for retail use and 36,331sqm for office use (approx 30,000 NLA) with 1,100sqm floor plates and a side core layout.
Macquarie have not activated any leasing campaigns for the project and the purchaser will likely take on all the leasing risk. Other major commercial pre-sales in the market are typically pre-committed, such as the Wynyard Place development which AMP Capital acquired on a 4.75% yield with NAB as 45% pre-committed tenant.
Cap Rates have however firmed considerably since the AMP deal and it is likely that ISPT will be paying as much as 4.75% for the fully vacant building, equating to 4.5% after taking into the cost of leasing incentives. Such a deal would require ISPT to pay as much as $960M for the development, equating to $32,000/sqm. This compares to the $26,400/sqm that AMP Capital paid Brookfield for Wynyard Place.
The tower is due for completion by 2024 when the metro line opens, as per agreement between Macquarie and the NSW government.
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