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PAG bought 44 Market Street at a 6.6 percent cap rate
PAG has acquired an office tower in central Sydney for A$393.1 million ($257.8 million), with the Asian private equity major taking advantage of a downturn in the Aussie market to pick up the property at a discount.
The Hong Kong and Tokyo-based fund manager closed on its purchase of 44 Market Street this past week after first exchanging contracts with the vendor, Dexus, in June, according to a statement by the Australian property investment firm.

The deal for the 30,000 square metre (322,917 square foot) grade A office tower was done at a 17 percent discount from its book valuation as of 31 December, according to Dexus, with the property trading at a cap rate of 6.6 percent, per industry sources who spoke with Mingtiandi.
PAG is understood to be making the investment at least in part from its PAG Real Estate Partners III core-plus/value-add fund, which has now reached a $1.8 billion final closing, according to an account published today by PERE.
“The sale is the first significant office transaction within the Sydney CBD for 2023, which appealed to investors given the ability to grow income,” Luke Billiau, head of capital markets for Australia and New Zealand said in an update on LinkedIn. The capital markets teams at JLL and Knight Frank worked together in marketing the 26-storey tower on Dexus’ behalf.
Broderick Storie heads the core-plus/value-add strategy at PAG Real Estate
At the stated compensation, PAG is paying just over A$13,103 per square metre for the 1972-vintage tower and its views of Darling Harbour, according to Mingtiandi calculations.
Net take-up of grade A office space in Sydney’s central business district has stayed in negative territory for four of the last six quarters, according to JLL, with the amount of space leased by tenants in the city’s urban core contracting by 35,000 square metres from April through June as major tenants cut their footprints.
Vacancy in prime buildings in Sydney’s central business district climbed to 14.9 percent during the second quarter, while the broader grade A market stood at 14.4 percent, JLL said, with vacancy in the district having been at double-digit levels since late 2019.
Dexus’ sale of 44 Market Street was the only office investment transaction in Sydney’s central business district during the second quarter, with overall investment deal volumes in Australia down 72 percent in the first three months of this year from the same period in 2022, as a total of just $2.9 billion in assets traded, according to data from MSCI.
The market index maker reported that, with interest rates on the rise and political tensions growing globally, transaction volumes in Australia were down 40 percent in the 12 months ending 31 March, compared to the preceding period. In a recent statement Dexus indicated that a portfolio of 175 of the company’s assets, comprising 32 office properties and 143 industrial properties, had declined in value by 6.0 percent as of 30 June, compared to six months earlier.
PAG’s Sydney acquisition is the first major deal reported for the third edition of the firm’s core-plus/value-add fund since its purchase of the Cross Street Exchange in Singapore during January of last year.
With the fund having spent S$810.8 million (then $603 million) to purchase that commercial block near the Raffles Place financial district from Frasers Logistics & Commercial Trust, capital equivalent to nearly half of the total equity raised for PAG Real Estate Partners III has now been committed to the two projects.
The $1.8 billion which PAG raised for its latest vehicle is down 20 percent from the $2.25 billion which the firm raised for PAG Real Estate Partners II by its final close in 2019. PAG representatives declined to comment regard to the fundraising or the office acquisition when contacted by Mingtiandi.
Among the documented investors in PAG’s latest fund are the California State Teachers Retirement System (CalSTRS), which committed $200 million to the strategy in mid-2022. PAG received commitments to the fund from 18 institutional investors, according to the PERE report, with the Employees Retirement System of Texas having kicked in $50 million. By the beginning of this year, PAG had reached $270 million in pledges to the vehicle, according to a filing with the US Securities and Exchange Commission at the time.
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