Japan’s telco giant, NTT $72 mill struck B4 the pandemic

Fortune favours the bold: How 200 Victoria Street got sold to Japanese telecommunications giant NTT for A$72 million just ahead of an international pandemic.

Trent Preece was the chief negotiator at the time.

In a race against the turmoil of COVID pandemic and its impact on inbound investment, a subsidiary of one of Nippon Telegraph and Telephone Corporation (NTT), the fourth largest telecommunications company in the world secures a blue-chip investment-grade tower in Melbourne’s sought-after office market.

The Asian Executive interviews the chief negotiator at the time, Trent Preece.

TAE: Can you provide our readers with some insight into the way the deal evolved and consummated over time?

TP: Certainly. I have been working closely with Sydney based investment firm, Realmont Property Partners for more than a year and who have multiple mandates, including those from NTT to acquire suitable investment opportunities in the Melbourne CBD. My previous background as a commercial valuer has allowed me intimate financial knowledge of city assets. In fact, I was the manager involved with the acquisition valuation of 200 Victoria St for the vendor, Australian Unity in 2014, which as sold then for $42.3 million. While the current deal has made recent headlines, it was in fact struck before new year’s eve heading into 2020. Between that time to the present, we had to endure a due diligence period, FIRB approval prior to exchange of contracts and then, of course, the COVID-19 pandemic. The pandemic issue was the wild card in the pack because international investment, as we any other form of investment relies on the continuing confidence of investors. FIRB approval probably took a bit longer than was preferred owing to the Australian holiday season. Contracts were exchanged in late March, following the peak of the COVID-19 onset on 23 March 2020 and to each parties’ credit, the terms were exactly as agreed upon on that fateful new year’s eve.

TAE: What do you suppose were some of the drivers for the decision for NTT to acquire 200 Victoria Street?

TP: In general, I think there was an appreciation of the lack of quality investment stock in the Melbourne CBD, and opportunities like this one were quite rare. On the flip side, the Sydney market is priced significantly higher than Melbourne based on like-for-like such that Melbourne could be seen by many as better value for money. The mandate for NTT was to secure a quality, A-grade tower NTT would have been made aware that one of Australia’s most valuable companies, CSL has pre-committed 35,000 square metres in stage two of PDG Corporation’s Elizabeth North development. The more obvious feature of the location is that it is centrally positioned between world-recognised Australian learning institutions, University of Melbourne and RMIT.

TAE: How long had NTT been seeking investment opportunities in Australia?

TP: As far as I am aware, since early 2019 if not earlier than that. Realmont did facilitate a 50 per cent acquisition

of 121 Marcus Street, Canberra on behalf of NTT – the Japanese company’s first purchase in Australia.

TAE: What is your view about the relative popularity of Melbourne for international students after COVID-19?

TP: I am not an economist by training, but I have travelled overseas a great deal. My sense of it is that there a concern with how other international cities have managed to curtail the spread of COVID-19. Melbourne, on the other hand, has managed to do a commendable job. If I put myself in the shoes of families deciding where best to send their children for overseas study, for this one factor, Melbourne would have to be highly regarded.

TAE: What is your view about mainland Chinese investment in Australia and how that may unfold into the future?

TP: The Chinese economy has already begun its recovery process. I suspect the continued interest in prime Australian real estate will always be there as part of any sound strategy to diversify global risk into investment grade economies. Also, much will depend on government policies which will temper the flow of capital both ways.

Deal Summary

• The acquisition represents a yield of 4.92 per cent and
a rate of $9,100 per square metre.
• Classified as an A-grade office tower, the property
is 67 per cent occupied by the state government and
29 per cent leased to Trinity College, the University of
Melbourne’s oldest student college.
• The transaction represents a doubling of capital value
since 2013.

The Parties

Vendor: Australian Unity represented by Colliers

Purchaser: 200 VS Pty Ltd (a wholly-owned subsidiary
of NTT) represented by a sovereign government with significant upside for future development.

The locational attributes will benefit enormously once the Melbourne Metro rail tunnel project is completed in 2025 and the new State Library Station is operational only 200 metres away.

For more information about this acquisition, click here.

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