Charter Hall eyes Canberra office expansion with play for ATO headquarters from Real I.S.

Real I.S. is selling the 43,000sq m Precinct C, on Genge Street, Civic, which it bought in 2009 for about $204.5m.

Property funds house Charter Hall is readying to again put its stamp on the Canberra office market and is targeting the purchase of the Australian Taxation Office headquarters complex in Civic for about $290m.

The move indicates Charter Hall’s belief in the strength of the nation’s capital city as a series of major leasing briefs are dealt with by the new Albanese government.

The property funds group is already deeply invested in the Canberra market and is separately supporting the development of a new building which the ATO will shift to in 2025.

But picking up the existing complex at 21 Genge St will give it time to reposition the asset and attract new tenants.

The acquisition is being struck at a yield in the mid-7 per cent range, which differs from much of the Canberra market, which is dominated by assets with long-term leases to the public service.

Charter Hall will be well positioned as Canberra has a 6 per cent vacancy and there is almost no vacancy in Barton. Notably, Civic has few buildings as modern as the Genge St asset which was built in 2009.

Once the ATO departs it will be repositioned to accommodate government and corporate tenants as it stands out against rival buildings, with much of Civic’s stock estimated to be between 25 to 40 years old.

The entire twin tower complex, in the heart of Canberra, was developed by the Queensland investment Corporation and built by Bovis Lend Lease. It spans a total 63,000sq m.

Real I.S. is selling the 43,000sq m Precinct C, which it bought in 2009 for about $204.5m. It comprises the larger building which has two separate wings connected by sky bridges. The 10-storey building also has basement parking for 277 cars.

The German company offered the property via real estate agencies Knight Frank and Cushman & Wakefield but they declined to comment.

Charter Hall has not commented on its latest play but on Monday its Prime Office Fund acquired the premium office site at 15 Sydney Ave, Barton, where the ATO is moving. It bought that from a development partnership comprising DOMA and Kenyon Investments.

That pair won the 33,021sq m precommitment to the ATO at a 1.156ha site in Barton near Parliament House. Its lease is for an initial 15-year term commencing in mid-2025, while the lease at Genge St runs until 2027.

Sitting near Parliament House in the very low vacancy Barton office precinct, the new five-storey building will have large floor plates and excellent natural light, views and strong sustainability credentials.

Charter Hall CEO David Harrison said at the time the manager had extended its partnership with both DOMA and the Commonwealth government as a long-term tenant customer, as it modernised its office portfolio and sought low vacancy markets with long-term growth.

The company has argued there is a bifurcation of office markets, and it will win tenants in state-of-the-art, sustainable and well-positioned buildings which have premium amenity and services.

Mr Harrison declined to comment on the Canberra deal-making but said when delivering the company results in August that rising rates would drive more sale and leaseback deals in fields ranging from telecommunications to government assets, with the firm likely to strike up fresh partnerships.

Canberra offices have run hot. The biggest completed deal was Charter Hall and Singaporean sovereign fund GIC last December teaming to acquire a Canberra block for $335m from Korean firm Mirae. GIC took a 95 per cent interest in the property, while Charter Hall has 5 per cent.

The listed group had earlier been linked to the purchase of the GeoSciences building, also from Real I.S., with that specialist complex in Symonston to trade for about $370m.