A slice of Brookfield Property Partners’ $2 billion sell-off is expected to come to a head this week in the next test for the soaring values of quality commercial buildings in Australia’s capital city markets.
The Canadian property behemoth is expected to this week choose a preferred party for a half-stake in the Southern Cross Towers in the Melbourne CBD, which has drawn the interest of M&G Real Estate and Blackstone, although the current status of these bidders is unknown.
Sources have said that the tower could sell on a yield as low as 5 per cent, in a deal that may lead to further valuation upticks in the sector, building on the momentum from the sale of the Investa Property Group portfolio in July.
Brookfield is also thought to be close to choosing an investment partner on Perth’s Brookfield Place, with the group expected to reap more than $1.3bn for the shares in both towers.
A shortlist of heavyweight offshore bidders has been left with Brookfield’s chief operating officer Kurt Wilkinson, who will make the final decision.
Sources have said that Brookfield has placed significant importance on its relationship with a potential partner, as Brookfield will retain the management of both the Perth and the Melbourne towers.
In recent months, it has formed global ties with China’s Anbang in Canada, AustralianSuper in the US, and is now syndicating a major Berlin complex to pension fund clients.
The Perth and Melbourne properties have been marketed separately, although this would not preclude them from being sold to the same buyer.
Brookfield and the agents on the deal, CBRE and Colliers International, declined to comment yesterday.
The prices paid for the more than $2bn of commercial and retail assets on offer from Brookfield will be a test for the bullishness of offshore capital for commercial property.
China Investment Corporation in July paid $2.45bn for a portfolio of eight office buildings being sold by the owner of Investa, Morgan Stanley.
The yield of about 5.3 per cent had many landlords and analysts claiming that it would revalue the sector and was a sign of surging offshore demand for quality commercial assets.
Many landlords have sought to capitalise with a spate of property coming on the market over the past two months.
Charter Hall Group has appointed JLL and Colliers International to market a $500m industrial portfolio, while tasking CBRE to market a $265m-plus office portfolio.
Valad Property Group, meanwhile, is selling a portfolio of $250m worth of office buildings through Knight Frank and CI Australia. The Reserve Bank last week warned that bank exposure to commercial property “warrants particular attention.”
This article first appeared in The Australian Business Review.