KKR enters Australia real estate market
KKR and Australia Securities Exchange-listed Abacus Property Group have together agreed to buy a majority stake in three office towers that form part of Melbourne’s World Trade Centre (WTC) for A$120.4 million ($112.3 million).
It is KKR's first real estate investment in Australia, expanding an Asia Pacific portfolio that already covers China, India and South Korea.
KKR and Abacus will take a 70% interest in the asset with the seller, Asset 1 WTC, holding on to 30%. KKR is contributing 75% of the equity and Abacus will provide local property, asset and development management services in addition to the remaining 25%. The price, which excludes transaction costs, represents an initial yield of 9.3% per annum.
The WTC complex was originally completed in 1983 and comprises four interconnected office buildings on the banks of the Yarra River directly opposite the Melbourne Convention Exhibition Centre. It is part of the Northbank precinct, one of the city's largest integrated waterfront mixed-use developments.
KKR and Abacus are buying into Towers 2, 3 and 4, which proved nearly 50,000 square meters of net rentable area, including 43,500 sqm of office space. It is 90% occupied with half of the office space leased to the Victoria state government.
"We are very pleased to expand our real estate business to the Australian market," said Bryan Southergill, director of Asia real estate for KKR, said in a statement. "We look forward to working together with our partners, Abacus and Asset 1 WTC, to achieve our investment objectives on this uniquely placed asset in the Melbourne market."
The move comes two months after KKR entered the Korean real estate market, teaming up with Hong Kong-based hedge fund LIM Advisors to acquire a commercial property in Seoul's central business district.
The WTC transaction is expected to be settled in October, subject to regulatory approval and the finalization of the senior bank facility.
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