$650m on cards for Sydney office skyscraper
Property funds management group Charter Hall has made a play for the landmark Sydney office tower owned by the listed Dexus and the private Perron Group in a bid that could see the Elizabeth Street property change hands for close to $650 million.
The skyscraper at 201 Elizabeth St, which had been touted as Sydney’s next opulent hotel and apartment tower, is expected to remain as an office block in a sign that the office market has further to run while the top end of the residential and hotel market is uncertain.
Dexus and Perron have added significant value to the asset over the last several years, winning key approvals for the luxury scheme, and hotel players and offshore-backed groups, including John Holland, had previously looked at the site.
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However, shifts in the market, and a desire by the private Perron Group to take on a more passive stance — seen in its purchase of a half stake in Sydney’s Westfield Burwood — rather than undertaking a major development, could favour Charter Hall’s bid.
The groups have not commented on their behind-the-scenes talks but Charter Hall’s ability to provide certain terms to the vendors may put it ahead in the contest where pricing has ranged from $620 million to $650 million.
The tower has been in play for years and the owners have added significant value since taking it off the market in 2014, when it almost sold for more than $400m to China’s Dalian Wanda.
Real estate agency Knight Frank has secured a capital partnership on the property but declined to comment. Savills has also advised on the hotel elements of the deal. By selling now, Dexus would realise a substantial uplift on its stake in the property without undertaking the apartment and hotel conversion that had been forecast to deliver trading profits in future years.
For Charter Hall, it could pick up an A-grade office tower overlooking Hyde Park for its funds and then reposition it at a time when relatively few new buildings are available.
Two years ago it swooped on a nearby Elizabeth St tower sold by Chinese group Bright Ruby for about $340 million as interest from buyers interested in a conversion fell away. Tenants in the tower may be keen for an upgrade as some had anticipated moving out if the hotel and apartment scheme got under way.
The race for the property drew in global heavyweights interested in developing the planned $1 billion, 50-level apartment and hotel development.
They included US investment house Starwood Capital and Michael Gu’s acquisitive iProsperity Group, with China’s Poly Group also showing an interest.
The five-star hotel and 250-unit apartment tower plan would have replaced the existing 38-level office block co-owned by Dexus and the Perron Group.
Dexus and Perron had plans to build the 350-room luxury hotel and apartment block but the rise in office rents may make a repositioning of the existing office building the most attractive course.
– with Lisa Allen
This article originally appeared on www.theaustralian.com.au/property.
