GPT to raise US$550m for US$365m Sydney office, retail deal

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Australian-listed GPT is tapping investors for A$800m (US$550.4m) to fund an A$531m (US$365.3m) deal comprising 25% stakes in an office complex and a retail-led asset in Sydney.

GPT, which has A$24bn of assets, plans 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.

Darling Park office complex and Cockle Bay Wharf complex (image: GPT)

The deal has a blended cap rate of 5.04% and an initial yield of 5.3%, according to a regulatory announcement.

Through the transaction, GPT will also gain a 25% stake in the Cockle Bay Park development, which will feature 63,000 sq.m. of office and 10,000 sq.m. of retail and entertaining space when completed.

To fund the purchase, the company is offering a fully underwritten $800m institutional placement and a non-underwritten security purchase plan to raise up to $50m.

The placement includes new shares at a fixed price of A$6.07 per stock, reflecting a 4.1% discount to GPT’s previous closing price, while the SPP is offering A$5.94 a share.

The transaction will see GPT and the GPT Wholesale Office Fund (GWOF) own a combined 75% interest in Darling Park 1 and 2 and Cockle Bay Wharf.

The Darling Park complex features three office towers in total, with the third 29,802 sq.m. tower owned entirely by GWOF.

Darling Park 1 and 2 comprise 103,600 sq.m. of net lettable area across two 27-storey office towers, while Cockle Bay Wharf offers 8,151 sq.m. of dining and retail space.

“Darling Park provides the group with an enhanced exposure to the strong Sydney office market via modern, high quality assets and access to future growth through the Cockle Bay Park development,” said GPT CEO Bob Johnston.

“The proceeds will also be applied to funding the next stage of growth from within the group’s development pipeline across the office and logistics sectors and will ensure that GPT has the capacity to continue to make additional investments, while also maintaining a very strong balance sheet position.”

The company has developments underway in Truganina, Melbourne and Wembley Business Park in Brisbane. It also expects to start on a new office and retail development at Melbourne Central next year.

The transaction comes after GPT disposed of its 50% share in Sydney’s MLC Centre to Dexus for A$800m earlier this year.

Other major office deals in Australia’s financial capital include Starwood Capital and Arrow Capital’s A$438.2m acquisition of the Zenith tower earlier this month and the A$231.2m sale of Dexus’ 11 Talavera Road asset in February.

Sydney CBD offices have gained significant investment interest due largely to the market’s ultra-low vacancy rate, last recorded at 4.1% in January, and rapid rental growth in recent years.

GPT is one of Australia’s largest diversified property groups and owns retail, office and logistics real estate across Australia.

The company listed on the Australian stock exchange as Australia’s first ever property trust in 1971.

It was launched and managed by Australian property firm LendLease until it was spun out in 2005.