Salvos Look to Partner Up on Sydney Office Site

The Salvation Army is looking for a joint-venture partner to help them redevelop a prime office site in the centre of Sydney.

The Salvos want to demolish their 10-storey building at Elizabeth Street—less than 100m from Hyde Park—and develop up to 28 levels with a gross floor area of nearly 16,000 square metres.

Global real estate and investment manager JLL told The Urban Developer the 1038-sq-m site with three street frontages would be ideal for an office or hotel development.

JLL Sydney director of capital markets Sophie Tieman said the Salvos were looking for a development partner via a project development agreement, or PDA.

The first stage is an expression-of-interest campaign to qualify groups with the capability of working with the Salvation Army.

“Stage two is when we’ll start having conversations with groups around what’s their vision for the site,” Tieman said. “And that’s when we will request financials and how they propose structuring a deal with the Salvation Army. But we’re not at that stage at this point.”

▲ An architect’s impression illustrates what planning controls will allow on the 1038-sq-m site. JLL says the site can be developed up to 28 levels.

Tieman said once that round closed, they would select a small number of groups to qualify their final bids.

“At this point we’re not going out to the market with a figure because there’s 100 different ways you can stage and structure this transaction.”

The Salvos occupy the first four floors of the existing building, although levels one to three are part of an internal auditorium with no floor plates. The upper six floors are leased to several universities.

However, those leases expire in 2026.

“It’s worth noting, construction costs have increased, as have lending costs, so the environment is more challenging than it has been in the past for development sites,” Tieman said.

“Given the leases are in place until 2026 and that’s where development clauses kick in, this is a great opportunity to get a hold of a site within the city but which won’t be capital intensive over the next few years anyway.”

▲ The Salvo’s current office building in Elizabeth Street. They want a partner to help redevelop the site.

The property at 140 Elizabeth Street is within 600m of five downtown train stations, as well as the famed Surry Hills food and drink district.

According to the expression-of-interest documents, the Salvos would consider an outright sale of the site, although Tieman said that “was not their preferred option”.

“Throughout this process they do want to get a clearer understanding of where the market’s pricing the site on a development but also an as-is scenario. So their preference is definitely for redevelopment but as part of the process they’re open to receiving EOIs on an as-is basis as well.”

She said in the past three weeks there had been “really strong interest” in the property, with 25 groups registering interest. Most are Australian development groups, plus a couple of institutionalised groups, some backed by offshore capital.

The expression-of-interest campaign closes on Friday.