_Parramatta continues to gather pace
Jessie Street Centre, situated at 2-12 Macquarie Street in Sydney’s Parramatta, recently sold for in excess of $400 million following an international marketing campaign led by Knight Frank and co-agents Cushman & Wakefield.
This marked the second largest metropolitan sale in Australia ever, following the sale of The Zenith in Chatswood for $438.2 million in June. A deal also transacted by Knight Frank Australia.
We sat down with Ben Schubert, Partner, National Head of Capital Markets, Australia, Paul Roberts, Partner, Head of Institutional Sales, Australia, and Graeme Russell, Partner, Institutional Sales, NSW to discuss the sale of Jessie Street Centre and how the team went about marketing and selling such a colossal asset.
First of all, tell us a little bit about the property.
Ben: Jessie Street Centre is one of the largest assets in Parramatta, occupying a corner site of 13,530 square metres and comprising around 53,902 square metres of net lettable area across 20 floors.
With over $30bn of infrastructure investment either underway or planned over the next 10 years, Western Sydney is going to go from strength to strength and is fast becoming one of Australia’s best performing office markets. Jessie Street Centre offered the opportunity to purchase an A-Grade building backed by the exceptional covenant strength of the Commonwealth of Australia with a WALE of over 4 years in this rapidly evolving market.
One of the challenges we faced marketing the property was the sheer scale of the asset, which somewhat reduced the buyer pool.
How did you go about marketing the property to overcome this issue?
Paul: We had to think out of the box when marketing this property to ensure we were able to reach the right audience and communicate the opportunities to perspective buyers both locally and internationally.
We undertook a major global marketing campaign, with face to face presentations to all major investors, focusing on the growth story of Parramatta. These were a key strategic component of the campaign as many of the offshore investors were not as familiar with the location and market dynamics, meaning we were able to provide a thorough overview and have an open discussion about the investment case Jessie Street Centre presented.
Our ‘why Parramatta’ messaging was also used locally, including at our drinks reception at the Knight Frank Sydney CBD office which included presentations from our Research & Consultancy and Town Planning teams on the future of Parramatta. Both these teams are well versed on the Parramatta market, along with how the changes to zoning in and around Western Sydney could impact the area, so they could offer insights into the where they see the precinct heading in the short and long term.
One of the other challenges was the uncertainty around the future of the ATO tenancy. What was the likelihood that they would vacate at the end of their tenancy in 2023 and if they did go, who would backfill the space?
Graeme: All stages of Parramatta Square are almost fully leased with the last 120,000sqm tower approximately 70% leased. Recent compulsory acquisitions to make way for the Metro Station have removed two future development sites from the market, meaning there are limited options for the ATO to consider at expiry of their lease in 2023.
In the case that they vacate, we would expect demand to come from various areas including State and Federal Government, major accountancy firms, major legal firms, financial institutions, insurance companies and engineering firms. This is in addition to several other corporate occupiers from other industries.
It is firmly on the radar of many major tenants who realise that population and jobs growth over the next decade is going to be concentrated in Western Sydney.
Given Jessie Street Centre is the largest asset in Parramatta, what does future liquidity look like?
Graeme: As the development pipeline in Parramatta is delivered between now and 2021, Jessie Street Centre will become the fourth or fifth most expensive asset in the Parramatta market. Parramatta is fast becoming Sydney’s second CBD, meaning as it continues to grow assets of this size will be desirable rather than unique.
What was the outcome of the sale?
Ben: The successful sale to Charter Hall and GIC for over $400 million was the result of a collaborative approach across our local and global business, with our global team vital to driving competitive tension through the process to ultimately deliver an excellent result for Brookfield.