Blackstone buys Sydney office tower from Scentre for US$1bn

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Australian-listed Scentre Group has offloaded its Sydney CBD office towers to US asset manager Blackstone for A$1.52bn (US$1.06bn), just weeks after selling off a stake in a Sydney mall.

Scentre, which owns and operates Westfield shopping centres across Australia and New Zealand, also announced an A$800m share buy-back programme to boost its return on equity for shareholders.

“The transaction price represents almost $800m in additional value created compared to our investment cost and has generated an unlevered internal rate of return of over 16% per annum for the Group,” said Scentre Group CEO Peter Allen in a statement.

Scentre Sydney CBD office tower (image: Scentre Group)

“Together with the recent joint venturing of Westfield Burwood, Scentre Group has now released $2.1bn of capital to further pursue our strategic objectives, creating long-term value for securityholders.”

Scentre will continue to own Westfield Sydney and Sydney Tower, while Blackstone will be granted a 299-year leasehold interest over the office components at 100 Market Street, and 77 and 85 Castlereagh Street.

The deal follows Scentre’s disposal of a 50% stake in Sydney’s Westfield Burwood shopping centre to Perth-based Perron Group for A$575m in May.

The Sydney office market has seen significant activity this year, with local investor GPT announcing plans earlier this month to buy quarter stakes in the Darling Park 1 and 2 office buildings and the Cockle Bay Wharf retail and entertaining centre in Sydney’s CBD for A$531m.

Other major office deals include Starwood Capital and Arrow Capital’s A$438.2m acquisition of the Zenith tower earlier this month and Dexus’ purchase of a 50% stake in the MLC Centre for A$800m in March.

Listed on the Australian stock exchange, Scentre Group has a platform of 41 shopping centres, with A$54.2bn of total assets under management.