Australia

117 Clarence Street,

Sydney, Australia

117 Clarence Street is a freehold 12-storey Commercial  and Retail building comprising circa 12,590 sqm of office and retail lettable area and is located at the Western Corridor  of the Sydney CBD. The Wynyard station and Barangaroo are mere minutes’ walk, while the vibrant retail shopping is a stone's throw away at the iconic Queen Victoria Building and Pitt Street Mall.  

 

TE Capital acquired the site, jointly with Roxy Pacific Holdings in 2016 for A$81 million. The property was acquired at an opportunistic price as we were able to act quickly and offered the vendor certainty. The property presented a degree of risk at acquisition, with a short weighted average lease expiry (WALE) of 1.69 years and 20% vacancy with a risk that the major tenant, the Government NSW who occupied circa 50% of the premises would move out in 6 months time. We were attracted to the property given the sound fundamentals of the property as it was well located and close to the new Barangaroo precinct which gave us confidence of the rent growth potential of the Western Corridor of the Sydney CBD. It also had good sub-divisible floor plates, great views of the harbour and good natural light given it was bounded by three roads - Clarence St, Kent St and Erskine St. Given the attractive entry metrics and the strong fundamentals of the property, we considered these attributes to more than compensate for the risks. 

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Our strategy involved capitalising on these fundamentals and repositioning the building through targeted capex and cosmetic upgrades such as refurbishment of the on-floor lobbies, bathrooms and tenancy spaces which significantly enhanced the profile of the building in a cost effective way. As a result, we were able to secure a renewal with the NSW Government at a higher than expected reversionary rent and also achieve new leases for the vacant spaces at significantly higher rents, increasing the occupancy to 100% and the weighted average lease expiry from 1.69 years to 2.95 years.

 

The property was divested for A$153 million in 2018, achieving an IRR in excess of 50%.