The NSW government just paid $332 million for a Martin Place building its owners valued at $222m

39 Martin Place. Photo: Simon Thomsen

39 Martin Place, Sydney, isn’t the prettiest of buildings – even though Tiffany & Co. is one of the tenants – but the 20th-floor office tower has certainly proved lucrative for ASX-listed property group Dexus, which announced today that it finalised a deal to sell the site, along with the lease on the adjacent Martin Place Shopping Circle to the NSW government for $332 million.

Transport for NSW issued Dexus with a compulsory acquisition notice for the property on the corner of Elizabeth and Castlereagh streets as part of the construction of the Sydney Metro.

Dexus Property Group and Dexus Wholesale Property Fund (DWPF) announced the deal to the ASX today, saying the $332 million price tag represented “a significant premium to the property’s book value of $222.6 million at 30 June 2016”. The sale price includes expected settlement adjustments and transaction costs.

The proceeds will be used by DEXUS and DWPF to repay existing debt facilities. Settlement is expected before the end of the year.

Dexus described 39 Martin Place as “B Grade office space with 800 square metres typical floors, six retail outlets and basement parking for 68 cars” on one of Sydney’s busiest pedestrian thoroughfares.

It had recently been refurbished, but will now be demolished as part of the Baird government’s Metro plan, which has already increased in estimated cost by more than 10% to $12.5 billion.

The government is buying 150 properties between Sydney’s CBD and Bankstown for the line, which will include stations at Barangaroo, Pitt Street, and Waterloo, as well as a major underground interchange in Martin Place as part of 15.5 kilometres of rail tunnels from Chatswood to Sydenham.

High-rise buildings will be knocked down in the Sydney CBD to make way for a major underground interchange at Martin Place for the Sydney Metro.

Two sites are being demolished for the underground construction, with NSW transport minister Andrew Constance has described as “like keyhole surgery here in the centre of Sydney”.

The sites will then become entrance points to the rail line.

The finalisation of the sale came on the same day Constance and premier Mike Baird announced plans for the Sydney Metro West linking the the CBDs of Parramatta and Sydney.

The new rail line will be able to move about 40,000 people an hour in each direction as the government pushed to add 100,000 additional workers to Parramatta over the next 20 years and and extra 34,000 jobs and 23,000 residents to Sydney Olympic Park by 2030.

The Baird government had no price tag for the Metro West plan saying it “will use a market-led approach to deliver value for money for taxpayers” and give the job to private enterprise and partly fund it through the recent sale of the sales electricity network. It wants the line completed by the second half of the 2020s.

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