The St Hilliers Property and Macquarie Real Estate Equity Fund No.5 (MREEF5) Joint Venture has entered into an agreement to sell a completed building on its Bond One development site at Walsh Bay to the major financial services group, AXA Australia.

The property will be purchased for the AXA Wholesale Australian Property Fund, which is a direct mandate of DB RREEF Funds Management Ltd.

The Bond One site at 20 Windmill Street will complete the successful Walsh Bay redevelopment commenced by Mirvac and Transfield in 2000. The site is owned by the NSW Maritime Authority and will be subject to a 99 year ground lease upon redevelopment.

The project has Development Approval for a new A-grade commercial building. The new building will comprise 9000 square metres of net-lettable area over eight levels with four levels of parking for 175 cars.

The sale and development agreement followed a limited expression of interest campaign by the developer to lock in an end-purchaser for the sale of this property prior to commencement of construction and represents a 6.5% yield with vacant possession.

St Hilliers Property, Chief Executive Officer, Tim Casey, said the Joint Venture had invited a limited number of parties to submit offers for the development site following which it had elected to exclusively negotiate with DB RREEF.

"The sale confirms the strong interest in the Walsh Bay precinct, which has been transformed in recent times into a highly desirable mix of residential, commercial and cultural facilities. The take up of commercial space in the Kings Street Wharf precinct and the imminent redevelopment of East Darling Harbour has also increased the profile of this north-western peninsula of the CBD," Mr Casey said.

"The Walsh Bay area is a very attractive place for businesses seeking prime office space close to the CBD, with generous parking, and now includes a number of major corporations such as American Express, Multiplex, Optimedia and Publicis Mojo."

Mr Casey added: "The project has utilised St Hilliers in-house skills and expertise whereby we have been able to package and quarantine delivery risk on behalf of AXA Australia as end-purchaser. This type of product is in strong demand by institutional investors and our ability to eliminate construction risk was a major factor in the successful transaction of the Bond One property."

St Hilliers Contracting will undertake the design and construction of the new building, which will include ecologically sustainable features aimed at reducing high operating costs and providing an attractive incentive for prospective tenants.

John Spitznagel, the Fund Manager of Macquarie Real Estate Equity Funds (MREEF), said this was the first completed transaction in the $117.5M MREEF5, which closed its capital raising this time last year. "We are very pleased with the outcome and look forward to working with all parties in the future."

Mr Casey added that St Hilliers Property intended to pursue a similar strategy for its most recent acquisition at 88 Talavera Road, North Ryde. This property, which is located opposite the Macquarie Shopping Centre, has development approval for the construction of a complex of three buildings with NLA of 24,755 square metres of commercial office space and parking for 356 cars. When completed the Talavera Road development will have a value of circa $120 million.

Andrew Hunter, of Chestertons acted on behalf of the vendor in negotiations for the sale of Bond One. Settlement of the Bond One property will follow completion of the building construction, which is scheduled for mid 2008.