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Sydney office block sold at 16% discount as rates, remote working hit sector

Sydney office block sold at 16% discount as rates, remote working hit sector
© Reuters. FILE PHOTO: The Sydney city centre skyline is seen as the state of New South Wales continues to report low numbers for new daily cases of the coronavirus disease (COVID-19) in Sydney, Australia, August 16, 2020. REUTERS/Loren Elliott/File Photo

By Lewis Jackson and Rishav Chatterjee

SYDNEY (Reuters) – Australian real estate firm Dexus said on Friday it had sold an office building in downtown Sydney, with the buyer receiving a 16% discount on a 2022 valuation as higher interest rates and home working crunch prices for office space.

Reuters reported on Wednesday that the company, one of Australia’s largest landlords, had signed a conditional deal last month to sell its Margaret Street building in Sydney’s central business district, citing its annual report.

The property industry globally, and office building owners in particular, are struggling as working from home and e-commerce lead tenants to reconsider floor space just as higher interest rates reduce building values and raise debt servicing costs.

Dexus sold the 18-story A-Grade office for A$293.1 million ($188 million), a 16.3% discount to its December 2022 valuation, according to company filings.

Quintessential Equity, an Australian property developer and investor, announced itself as the buyer on its website without elaborating. Dexus will own a A$50 million stake in the trust that will hold the property, it said in a statement.

In June, Dexus sold another premium office building in Sydney’s central business district for A$393.1 million, a near 17% discount to an independent valuation made in December.

Dexus CEO Darren Steinberg said on Wednesday forced sales were off the cards because it had raised enough financing from banks and a recent note issue to fund its pipeline and would only sell assets to recycle cash into higher-yielding projects.

($1 = 1.5613 Australian dollars)

Source: Investing.com

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