Suntec Reit buys into Melbourne building

It is paying $296m for 50% stake in waterfront integrated development Southgate Complex

Suntec Real Estate Investment Trust (Reit) is acquiring a 50 per cent stake in Southgate Complex in Melbourne for A$289 million (S$296 million).

The Reit has also entered into separate put and call option agreements to acquire the other half of the stake for the same amount.

Southgate Complex is a freehold waterfront integrated development on the south bank of Melbourne's Yarra River, comprising two A-Grade office towers, a three-storey retail podium and a carpark with 1,026 spaces.

"We are pleased to acquire the iconic Southgate Complex which is a strategic fit with Suntec Reit's portfolio of quality assets and in line with our strategy to expand our footprint in the Asia-Pacific," said Mr Yeo See Kiat, the Reit manager's chief executive officer.

This is Suntec Reit's second acquisition in Australia - it also owns a commercial building located at 177, Pacific Highway, North Sydney.

Southgate Complex has a total net lettable area of 820,324 sq ft and tenants include IBM, The Herald and Weekly Times, APT, Dairy Australia, City Road Melbourne and LinkedIn.

The committed occupancy was 88 per cent as at Aug 5 with a weighted lease expiry of about 4.6 years.

GROWTH POTENTIAL

It also offers organic growth potential from the repositioning of the retail component and the strengthening office market in the CBD of Melbourne.

MR YEO SEE KIAT, the Reit manager's chief executive officer, on Suntec Reit's acquisition of Southgate Complex.

The acquisition will enhance Suntec Reit's income and geographical diversification, said Mr Yeo.

"It also offers organic growth potential from the repositioning of the retail component and the strengthening office market in the CBD of Melbourne."

Australia is among the top overseas real estate markets for Singapore companies, which are on the prowl for higher-yielding assets amid a slowdown in their domestic market.

Last month, The Ascott - CapitaLand's wholly owned serviced residence business unit - acquired its first serviced residence in Docklands, Melbourne, for A$71 million through a joint venture with the Qatar Investment Authority.

Mapletree Logistics Trust announced in May that it had acquired four dry warehouses in Sydney for A$85 million.

A version of this article appeared in the print edition of The Straits Times on August 06, 2016, with the headline 'Suntec Reit buys into Melbourne building'. Print Edition | Subscribe