Taiwan's Daiken buys South Brisbane office for $81.1m

The local arm of Taiwan-listed Daiken Biomedical has paid $81.1 million for a fully leased office at 10 Browning Street, South Brisbane. It is the company’s second Queensland purchase in about four months, and it comes with a development site the agents pitch at 30 storeys or more.

For Brisbane developers, the message is that offshore money is paying for Kurilpa sites with income attached. A buyer can hold rent while it waits for a tower approval.

Why it matters

Daiken Investment One Australia bought from Forza Capital, according to Real Estate Source. Forza paid $65.5 million for the building in 2016. The sale price is about 24 per cent higher, our calculation.

The building was completed in 2008. It sits on a 4564 sqm site zoned Principal Centre in Kurilpa South, inside the Brisbane City Council area. The report says the site is code-assessable to 30 storeys. Agents point to nearby precedents of up to 50 storeys.

Those height claims come from the marketing agents, not a council decision. No application for the site has been reported.

Daiken’s earlier Queensland deal was Hope Island Central on the Gold Coast, bought for about $62.2 million from Argus Property Partners. Two purchases in four months suggest a buyer building a local portfolio.

The numbers

The office has 11,181 sqm of floor area and is fully leased. Income is about $6.81 million a year. On the $81.1 million price, that works out at a yield of about 8.4 per cent. Real Estate Source reports the same figure.

The weighted average lease expiry by income is 4.8 years. Tenants include Credit Corp, Snap Fitness, Thiess, Vienta and Visionstream. A hotel occupies one ground-floor retail tenancy.

Floorplates are about 2800 sqm. There are 372 basement car parks, a ratio of one per 30 sqm. The building holds a 1-star NABERS Energy rating, which matters for any buyer planning upgrades.

Forza bought the building from Armada Funds Management on a 7.9 per cent return. Daiken is buying at a higher yield than the previous owner did, which means it is paying less for each dollar of rent.

Marketing agents described the price as about 60 per cent below replacement cost. That is an agent claim and we have not tested it.

MP Commercial’s Mike Walsh and Peter Court acted for Forza. Colliers’ Tony Wang, Sam Arkell and Marshall Smith acted for Daiken.

Forza also sold 200 Creek Street, Spring Hill, about seven weeks earlier. The buyer was Direct Commercial Property and the price was about $55 million.

What’s next

With 4.8 years of lease term, Daiken has time before it must decide between holding the income and redeveloping. Any tower plan would need a development application to Brisbane City Council. We have not seen one.

The Hope Island purchase shows Daiken is comfortable with government-tenanted assets as well. The South Brisbane building has a more mixed tenant list, which spreads the income risk across several businesses but leaves more leases to roll over.

Watch the Kurilpa precinct for similar deals ahead of the 2032 Olympic and Paralympic Games. Developers and builders should track whether further income-producing sites trade at this yield.

Read more in our Queensland market coverage.