Construction has officially begun on Built’s adaptive reuse development in North Sydney, transforming the heritage office building designed by Harry Seidler into a new Reddam House Campus.
The start of construction marks a significant milestone in the development deal, which has secured a long-term lease to Inspired Education and a forward purchase agreement with Keppel Corporation (Keppel), a Singaporean asset manager.
Inspired Education, a global school portfolio manager and operator of the Reddam House brand in Australia, will hold a 20-year lease over the 9,150 square meters of floor space, with an option for an additional 20 years.
Keppel, which acquired the property at an initial yield of 4.25 per cent in a put and call arrangement for its $3 billion Keppel Education Asset Fund (KEAF), will assume ownership of the asset following the change of use approval and refurbishment works.
The approximate $120 million sale price has yielded a substantial upside on the end-of-life commercial asset that will see Inspired Education self-fund its adaptive re-use fitout. Built initially acquired the 41 McLaren Street, North Sydney property for $80 million in late 2021.
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Built development director Jono Cottee lauded the transaction’s success, highlighting Built’s prowess as both builder and developer in delivering a bespoke asset with a long-term, globally-backed tenant for offshore institution capital.
“Through our unique ability to deliver a turnkey facility for Inspired Education that also matched the requirement of the KEAF for a long-term stable income in the education sector, we achieved one of the strongest results of 2023 against the backdrop of a market challenged by increasing interest rates and yields,” said Cottee.
Leveraging its position as both developer and builder, Built has successfully addressed planning and construction risks in the project. This approach has resulted in an attractive solution for both tenants and investors, delivering a strong return on investment based on the initial purchase price.
“By navigating the complex planning, heritage and construction requirements, we can provide Inspired Education with the certainty of delivery for a new facility that meets their ongoing growth and expansion,” said Cottee. “Keppel are then provided with security of income for their investors in a fully refurbished building that comes with a long-term lease with CPI backed increases with a leading global operator of premium schools.”
Under the arrangement with Inspired Education and Keppel, Built is responsible for managing the upgrade and transformation into a 1,560 student K-12 campus scheduled to open in the 2025 school year.
The upgrade will add 1,650 square metres of education space to the existing building and transform the carpark into a school drop-off and auditorium. The new campus will feature a performance space, theatre, sports hall, modern classrooms, high-tech science and design technology labs, music rooms, drama and dance studios, and a library.