Investa Property Group and Stockland have taken the first steps in a joint venture that could see the pair owning about $700 million of Sydney property assets.
In the first leg of the tie-up, the unlisted Investa Commercial Property Fund has bought a half-stake in Sydney's 135 King Street for $130 million.
The deal will give the Investa fund an initial half-stake in the complex, which includes both an office tower and the Glasshouse Shopping Centre.
Co-owner Stockland is likely to later emerge with full control of that retail centre, once negotiations are finalised.
In the second leg of the tie-up, Investa's listed office fund is in talks to buy the office component of Sydney's near-$400 million Piccadilly Centre from Stockland, which would keep the retail component of that asset.
The relationship between the pair -- with Investa specialising in office and Stockland in retail -- could grow. Stockland commercial property chief executive John Schroder said 135 King Street had potential for redevelopment.
"We're looking forward to a new and productive joint-venture with Investa Commercial Property Fund on this prime retail asset," he said.
Stockland surprised the market when in December it exercised its pre-emptive right, as the co-owner of the complex, to nominate Investa to buy the interest in 135 King Street.
That put it ahead of Industry Superannuation Property Trust, which had agreed to purchase the property from the Colonial First State-managed PPS fund, in a deal brokered by Jones Lang LaSalle and Colliers International.
The stake was acquired on a core yield of 7 per cent and took ICPF's total assets under management to more than $2.2 billion.
Fund manager Peter Menegazzo said: "We are very pleased to have secured an interest in an asset of this calibre, which strengthens ICPF's weighting to Sydney, which reduced following the recent sale of 231 Elizabeth Street and the acquisition of assets in Brisbane and Melbourne."
The 29-level building has a net lettable area of 31,030 square metres with more than 27,000 square metres of the accommodation office. It has high vacancy rates, with 26 per cent of the tower without a tenant. It is being refurnished to try to attract top tenants.