A development site at the northern end of the Barangaroo peninsula, Millers Point, has been offered for sale amid rising demand for mixed use space in the area that is independent to the Lend Lease project.
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A consortium of three private investors are selling their long-held 1-3 Munn Street offices, which adjoins the new headland park at what has been dubbed Barangaroo North. The price for the buildings offered with ground lease is estimated at $40 million.
James Parry, managing director of capital markets at Knight Frank, is advising on the sale and said it was rare for these heritage-style assets to be offered.
He said the tenant, Universal Music, had come to the end of their lease and the owners felt it was time to sell and gain traction from the adjoining Barangaroo development.
‘‘Inner city properties like these are now being seen in a new light with the proximity to Barangaroo. They can be converted into a hotel to cater for the over flow from Crown and also the new huge number of office workers that will be in the area,’’ Mr Parry said.
‘‘The are also no height restrictions or floor to space ratio restrictions on the site, making it attractive for developers. Hotel operators, office tenants, serviced apartments or strata developers are interested, but residential is not allowed.
‘‘That said, the owners have decided not to get planning approval, so it’s unclear just how much development potential there is and the price will reflect this.’’
Currently on the property are two heritage-listed sandstone bond store buildings that have been converted to 3843 square offices with parking, with a fully leased income of about $2.6 million a year.
The ultimate owner of the freehold is the Barangaroo Development Authority (BDA).
Mr Parry said BDA would consider re-negotiating the ground lease to be longer, would be interested in negotiating to move the car spaces to a nearby car park and would be interested in potentially buying the heritage buildings for a cultural centre or swapping this parcel of land for one of their parcels.
The sale comes as the office towers at Barangaroo start to take shape, in what will be considered a major financial hub of Asia Pacific.
Tenants include Lend Lease, Westpac, KPMG, PricewaterhouseCoopers(PWC), HSBC and law firm Gilbert + Tobin.
There was also market speculation that technology groups such as Google and Apple could lease office space, while Westpac could also increase its exposure, if it moved the remaining staff from the nearby 275 Kent Street head office.
Lend Lease’s chief executive Steve McCann said recently that the group had completed the leases to PWC and HSBC at competitive rents and market incentives which are lower than some of the numbers that have been quoted by agents.
He said it was a positive outcome and showed that the Sydney office market was improving.
‘‘We can offer the businesses the efficiencies they now require with activity-based working offices,’’ he said.
Following completion of the sale of the 10 per cent interest, Lend Lease's equity commitment to the towers trust company will fall from $500 million to $300 million.
There remains about 103,000 sq m to lease in the three office towers, with T1, the new home of PWC and HSBC, only 34 per cent leased.
