Charter Hall teams with Wyllie for $150m Sydney CBD tower play

Charter Hall has paid $150m for an office tower in the heart of the Sydney CBD.

Property fund manager Charter Hall has swooped on a Castlereagh St tower in the heart of the Sydney CBD for about $150m in a sign of its confidence in city office and retail markets.

The group has set up and will run a fresh wholesale partnership which will be backed by its existing domestic institutional partners, with minority interests taken by WA’s Wyllie Group and the firm.

The Charter Hall-managed fund has acquired 74 Castlereagh St and plans to release the value inherent in the property by repositioning both the retail and office elements. The building was sold by Country State Development Pty Ltd, a private family office and Vince Kernahan, James Girvan and Callum Cooke of Colliers advised on the sale. Charter Hall could take a number of courses in managing the building.

“Prime quality assets with luxury retail space will always provide rental growth and the optionality this building provides is an extension of our strategic investment approach,” Charter Hall chief executive David Harrison said.

The manager is yet to determine whether it will simply further lease the building up and hold it, or whether it will dispose of it in the future either as a whole building or by selling off strata floors.

For now, the focus will be on leasing the prime Cartier retail floors when the retailer vacates late next year, with the space expected to draw stiff competition among global chains.

The building is next to Hermès Australia and near the Chanel store, as well as David Jones on Elizabeth St, which is owned by a Charter Hall-managed fund.

The multi-tenanted Sydney property, best known as the Cartier Building, hit the block mid-year in one of the city’s first A-grade boutique building office offers.

The 17-level building was completed in 1991 and spans 5475sq m, comprising office areas of 4209sq m and 1265sq m of lower ground, ground, mezzanine and first floor retail space.

The foyer and facade were refurbished in 2016 to accommodate Cartier. Office tenants include serviced offices, investment companies, lawyers, consulting and IT firms.

The high-end retail site also benefits from being opposite Westfield Sydney and the office floorplates of 350sq m, with three sides of light, are well suited to the busy smaller end of the leasing market.

While the property manager is still weighing up its options, there is some opportunities in Sydney‘s strata market, partly due to a buy up of space for Sydney Metro. About 60,000sq m has been acquired by the NSW government for the new Hunter Street station and over station developments.

That move is estimated to have dislocated about 40,000sq m of tenants, effectively creating a space squeeze in the 200-400sq m floor plate leasing and strata buyer market.

Both owner occupiers and investors also have a chance under acquisition rules to put their capital back into new investments without being hit by stamp duty.

Charter Hall has a $70bn property funds empire which includes some of the nation’s largest properties but the group also has an eye for value plays.

The private Wyllie holds strategic positions in both direct property and a concentrated portfolio of small to mid-cap public and private companies Its property assets include the Perth Convention & Exhibition Centre, the Murray River Farm, Hillarys Boardwalk Retail Precinct and North Kellyville Square.