$1.8bn deal locked in for Sydney’s Chifley Tower

In one of the largest deals of the property cycle, Charter Hall said two of its wholesale funds would acquire a half interest in the famous asset at 2 Chifley Square, with the group to take on the asset and property management of the entire tower, lifting its funds under management to more than $33 billion.

Charter Hall’s Prime Office Fund and its DVP wholesale partnership have formed a joint-venture that will own Chifley tower in co-ownership with GIC.

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The sale marks a continuing high point in the office property cycle with the prices of both towers and rents at historically high levels, particularly in Sydney and Melbourne.

Charter Hall has acquired a number of prime office buildings in the last 12 months on the back of its belief in the strength of the market and that interest rates will remain lower for longer.

The market has already seen a series out-size office deals including US private equity group Blackstone acquiring the office towers above Westfield Sydney for $1.52bn and Dexus buying 80 Collins Street in Melbourne for $1.47bn.

Charter Hall Group chief executive David Harrison says the transaction extends the company’s office platform funds to more than $15 billion, while also extending a well-established 15-year relationship with GIC.

“We have used our diversified funds platform to bring two of our wholesale funds/partnerships together to form a joint venture with GIC to own one of Australia’s pre-eminent premium grade office towers situated on arguably the best prime CBD site in Sydney,” he says.

The listed group has a weighted average stake across CPOF and DVP of 8 per cent.

The property, occupied by a who’s who of corporate Australia, sports panoramic views of Sydney Harbour and the Royal Botanic Garden, and is the best known tower from the 1980s development boom.

The property, developed by the late entrepreneur Alan Bond before a Japanese company took on the project as he ran into strife, is a premium grade office tower of 68,867sqm, with more than 5000sq m of prime Sydney CBD retail across lower ground and upper ground and first floor.

It has 42 levels of office space situated on the second largest site area in the Sydney CBD.

The property is secured by a 4.3-year weighted average lease expiry, weighted average rent reviews of 3.8% and is 98.3% occupied and leased to multiple blue-chip tenants including UBS, Investec, Sumitomo Mitsui Banking Corp and Morgan Stanley Australia.

The Australian in February revealed that Charter Hall was in talks with GIC about a deal on the leasehold interest after last year reporting that the group had outmanoeuvred its rivals by buying the freehold.

That deal was brokered by Colliers International and came as Cushman & Wakefield and JLL were marketing the half interest for GIC.

This article originally appeared on www.theaustralian.com.au/property.