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WESTPAC Banking Group (ASX:WBC) has given Mirvac Group (ASX:MGR) an early Christmas present after securing a new lease agreement for its head office in Sydney's CBD.
However, the banking giant has cut back the size of its new lease at 275 Kent Street which will remain its home base until at least 2030.
Mirvac, which co-owns the property with an affiliate of Blackstone Real Estate Asia, says Westpac has signed a 12-year lease for 58,500sqm, starting from November 2018.
Westpac currently occupies the entire 32-level building, or about 70,000sqm. The new lease will scale its presence back to include levels 1 to 23 of the office tower, leaving Mirvac to find tenants for the remaining space.
The move comes amid rumours earlier this year that Westpac was considering a move from Kent Street as part of a consolidation of its office space in the Sydney CBD.
Financial details of the latest lease have not been disclosed, although it is understood Westpac is paying around $57 million a year for Kent Street on the current lease.
Mirvac sold a 50 per cent interest in the Kent Street tower to Blackstone last year for $435 million, on a 6.65 per cent initial passing yield, as part of de-risking strategy for its property portfolio.
The property has since been earmarked for an upgrade which will include work on the ground level to improve the retail offering.
"I am delighted we have been able to grow our relationship with Westpac and secure their long-term commitment at 275 Kent Street in Sydney," says Mirvac CEO Susan Lloyd-Hurwitz.
"Demonstrating the significant value we place on our customer relationships, our team has worked closely with Westpac for a number of months to better understand their priorities and create a sustainable world-class environment that enhances the lives of those who work there.
"Westpac will benefit from a close proximity to the soon-to-be-enhanced Wynyard Walk and the Barangaroo development, with 275 Kent Street set to become a prominent anchor building in this emerging western corridor of the Sydney CBD."
Mirvac's refurbishment of the tower is planned to take advantage of the new Wynyard Walk with a realignment of the building's entry, as well as upgrades and extensions to the lobby.
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