Ashe Morgan is targeting the purchase of 130 Pitt Street, Sydney.
The big office reset is hitting Sydney’s CBD as funds house Ashe Morgan moves to pick up a Pitt Street tower for about $200m.
The impending deal is one of the larger plays of this half in the subdued office market whereby billions of dollars’ worth of towers have been put up for sale but are yet to trade. While there have already been sales in Sydney’s suburban markets and in parts of Melbourne, the deal could be one of the first to reflect the new conditions for office markets, where values are under pressure despite rising rents.
The purchase illustrates a longer-term confidence that funds groups like Ashe Morgan have in the top end of the office market turning around once values stabilise.
April Gate Capital wants to raise about $110m in equity to back its $182m acquisition of 50 Pitt Street, and the latest deal is likely to be put to investors.
Ashe Morgan is choosing to buy at a cyclical low point from MEC Global Partners Asia, which acquired the building at 130 Pitt Street in 2018 for $229m.
The complex was billed as a value-add opportunity in the heart of Sydney’s CBD and was marketed by Josh Cullen and Mark Hansen of Cushman & Wakefield, and Ben Schubert, Seb Turnbull and Neil Brookes of Savills. The building combines B-grade offices with flagship retail in one of the city’s most tightly held locations – as the property is adjacent to Pitt Street Mall and near Martin Place Metro.
Sports brand Adidas occupies 1131sq m across the basement, ground and mezzanine levels, and pays about 32 per cent of gross income. Ashe Morgan could bring its active asset management and retail smarts to boost the property. Office rents in the building are also below market levels.
MEC Global reworked the building in 2022 with capital works to the facade, ground floor, lobby lifts, and end-of-trip facilities – and it repositioned the retail space. The building has about 9829sq m of office space over 13 upper levels.
MEC Global is also offloading two Melbourne buildings – 575 Bourke Street and 850 Collins Street.
The office market is fragile, as US funds management giant Hines has ended talks to buy the 121 Castlereagh Street complex in the heart of the Sydney CBD from Cbus Property in a deal worth about $220m.
That deal would have been a shot in the arm for the office market but was derailed by fresh pricing terms suggested to the vendor.
Cbus Property has been selling premium offices as it puts funds into new projects.