An office block will be turned into apartments with arguably the best views of Sydney Harbour after it was snapped up by China's Dalian Wanda Group for $425 million.
The sale of Gold Fields House, at 1 Alfred Street, Circular Quay, comes as more Chinese investors are tipped to enter the Australian market in the coming year. They are cashed up and very large insurance and pension funds that like this country's transparent regulations and ease of doing deals.
CBRE head of research Australia Stephen McNabb said investors are expected to remain risk averse and this will ensure that, in most cases, there will continue to be a wide spread between the yields that can be achieved for prime versus secondary assets until there are signs of stronger economic growth.
It is expected the Goldfields site will be redeveloped into upmarket apartments. The harbourside building, controlled by Blackstone and a group of pension funds, was sold by JLL and CBRE.
Another 1960s-era building nearby, 275 George Street, is understood to be close to being bought by Charter Hall. More large-ticket sales are due to be completed in the last business week of 2014.
Neil Brookes, Knight Frank's head of capital markets Asia Pacific, says investors are shifting their focus towards sustainable returns in the long term.
"The key factors for Chinese investors are the policy push from the Chinese government to diversify into other countries; a softening domestic market; and the pull from higher returns achievable in overseas markets. Australia, the US and the UK are the top three markets most Chinese investors are looking at.
"We saw five times as much capital outflow from China into these three markets in 2013 alone compared to the previous year. We expect the transaction volumes from Chinese investors into these three markets this year will match or even exceed that of last year.
There has been a tremendous surge of Chinese outward investment in overseas real estate in recent years. From 2009 to 2014, the total value of Chinese overseas investment volume has skyrocketed from $US600 million to hit an estimated US$15 billion ($18.45 billion).
"So far the thrust of this investment has been focused in gateway cities of Australia, the US and the UK. In 2014, Australia has seen the strongest growth in inbound real estate investment from China at over 60 per cent increase year on year," Mr Brookes said.
In Melbourne, Mirvac Group has entered into an agreement with ISPT, one of Australia's largest unlisted property fund managers, to sell a 50 per cent interest in its office development at 2 Riverside Quay, Melbourne, for $106 million.
Once completed, the 21-storey, A-grade office building of 21,000sqm-plus will be the new home of PwC.
Under the deal, ISPT will fund 50 per cent of the total development costs throughout the construction period, and Mirvac will provide a five-year rental guarantee on any unlet office and retail space from the date of practical completion.
The Goldfields house sale comes as Circular Quay is set for a $1 billion revamp after a plan for a striking angular office building was approved for the site of the AMP building at 50 Bridge Street. 3XN, a Danish architectural firm, has been appointed to the project.
The approval for the second phase of the project involves rejuvenation of AMP Capital's prime holdings in Circular Quay, including 33 Alfred Street, 50 Bridge Street, and properties at Young and Loftus streets (1.1 hectares). The redevelopment at the northern end of the city will throw down the gauntlet to its western corridor rival Barangaroo.
Colliers International managing director of capital markets and investment services John Marasco said in the year to date, investment volumes in Australia were slightly higher than the same time last year, with $19.8 billion transacted among all asset classes compared with $17.7 billion in 2013.
"Our understanding of deals currently in play, as well as the positive sentiment towards property investment, means that it is likely we will achieve similar investment levels in 2014 as we did in 2013," Mr Marasco said. "Overall volumes are unlikely to exceed 2007 levels, however, they will in some individual sectors and markets.
"Pacific investors continue to believe that good investment opportunities exist in the global market but are increasingly difficult to find. This lack of stock is now leading to more investors looking to behave differently to maintain strong returns.
Colliers International national director of research Nerida Conisbee said the city in which Pacific investors prefer to invest is Sydney (58 per cent), followed by Brisbane (44 per cent), then Melbourne (43 per cent). Compared with previous surveys, Ms Conisbee said such strong interest in Brisbane was a new trend, probably reflecting the higher yields being achieved in this market.
