The manager of Keppel REIT has entered into a contract of sale to acquire an effective 50% interest in 255 George Street for A$363.8 million ($321.0 million). The contract was entered into between The Trust Company (Australia) Limited, the trustee of Keppel REIT’s indirect wholly-owned subsidiary, and Mirvac Wholesale Office Fund I’s trustee, Mirvac Funds Management Australia Limited, on March 28.

The remaining 50% stake will remain with Mirvac Funds Management Australia Limited.

The 29-storey property is a freehold Grade A office building located in Sydney’s centre business district (CBD). It has a net lettable area (NLA) of 38,996.8 sqm (419,758.06 sq ft) comprising 38,805.0 sqm of office space and 191.8 sqm of retail space, as well as 188 car park lots.

It is also accessible by several modes of transportation and has high prominence and visibility along George Street, one of the busiest roads in Sydney’s CBD.

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The property has a weighted average lease expiry (WALE) of 6.8 years and a committed occupancy of 93.0% as at Dec 31, 2023. It has a diversified tenant base comprising high quality tenants from the government and financial institutions sectors such as the Australian Taxation Office and Bank of Queensland.

The acquisition consideration translates to A$18,658 psm, which represents a first-year yield that exceeds 6.0%. It is also expected to be accretive to Keppel REIT’s distribution per unit (DPU) of 1.4% on a pro forma basis as at Dec 31, 2023.

The sum was negotiated on a willing-buyer and willing-seller basis after taking into account the independent valuation of the property.

The acquisition is expected to cost the REIT a total of A$390.1 million including fees.

The move, which marks the REIT’s deeper partnership with Mirvac, will see Keppel REIT’s Australian portfolio comprising 19.3% of its total assets under management (AUM).

“Located in the highly sought after core precinct of Sydney’s CBD, 255 George Street is an iconic freehold Grade A office building with excellent environmental, social and governance (ESG) credentials,” says Koh Wee Lih, CEO of the manager.

“With the core precinct's positive office market outlook and the property’s prime specifications, this DPU-accretive acquisition will enhance the quality of Keppel REIT’s portfolio and we are confident that it will continue to attract companies looking for quality office spaces in Sydney,” he adds.

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“Looking ahead, we will continue to seek opportunities within Keppel REIT’s portfolio for optimisation and capital recycling, while remaining disciplined in capital management, to capture opportunities with attractive total returns over the long term,” he continues.

This article first appeared on The Edge Sigapore.