Oxford Properties Acquires Australian Office Fund for $2.4B

By Scott Baltic

Paul Brundage, Head of Europe and Asia Pacific, Oxford Properties Group

Oxford Properties Group, the real estate arm of OMERS, has closed the $2.4 billion (A$3.4 billion) acquisition of the Investa Office Fund, including Investa’s 19-asset, 5.3 million-square-foot portfolio in Australia. As of closing, the portfolio’s ownership vehicle has been renamed Oxford Investa Property Partners.

As part of the transaction, Oxford raised an approximately $1.6 billion (A$2.2 billion) debt facility arranged and underwritten by a syndicate comprising Commonwealth Bank of Australia, ING Bank, Morgan Stanley and Westpac Banking Corp. Oxford will serve as strategic asset manager but has retained the Investa Office Management platform to continue its role in managing the portfolio and providing investment, asset, property, project and development management services.

126 Phillip St.

As of mid-2018, 80 percent of the portfolio was rated as A Grade or Premium, and 65 percent was in Sydney, with 15 percent located in Melbourne and 14 percent in Brisbane. The portfolio had an average total occupancy of 97 percent and encompassed 437 tenants, also at mid-year.

One noteworthy property is 126 Phillip St. in Sydney, a 445,400-square-foot (41,376-square-meter) office property. Designed by Norman Foster, it was completed in 2005. Another signature asset is 567 Collins St. in Melbourne, which was completed in mid-2016. It has 26 stories and about 592,000 square feet (55,000 square meters) of net leasable space.

Tight now and for a while

567 Collins St.

The CBD office markets in both Sydney and Melbourne remain well below their typical—over the past two decades—vacancies of 7 to 7.5 percent, according to a second-half 2018 report from Colliers International. Currently, the average Premium vacancy is 4.6 percent in Sydney and 3.6 percent in Melbourne. In contrast, the comparable figure in Brisbane is 14.6 percent.

The report predicts that “these tight market conditions in both cities will be with us for some time yet.” Colliers bases its forecast on three factors—no significant new supply will complete till 2020, preleasing of the space in the pipeline is running at 60 percent in Sydney and 70 percent in Melbourne, and strong, ongoing population and job growth in both cities is continuing to drive the white-collar employment market. In response to rising rents, tenants are looking to tighten workspace ratios and seek buildings that provide flexible space.

In a prepared statement, Oxford said the acquisition gave it “an immediate and substantial presence in the Australian market.” Paul Brundage, Oxford’s head of Europe and Asia Pacific, added, “We see a lot of runway to grow our business in Australia, leveraging the immediate scale created by this transaction.”

Morgan Stanley acted as financial advisor to Oxford. In addition, the buyer was advised by the Sydney-based teams at Ashurst, Cushman & Wakefield and EY. Following this transaction, Oxford reportedly plans to divest a number of non-core properties to reposition its portfolio. Among other new projects, the company revealed plans to develop St. John’s Terminal, a 1.3 million-square-foot office building in New York City.

Images courtesy of Oxford Properties Group