GIC backs Exchange Tower purchase as Perth regains shine
Singapore’s GIC Real Estate has capped a busy year for office investors by backing the purchase of Perth’s Exchange Tower for $326 million with the sovereign wealth fund betting that resources cities will set the pace next year as it supports a Primewest-run vehicle aiming to capture this growth.
The savvy Singaporean investor has already poured significant capital into buying up towers in Brisbane via Charter Hall and is also poised to deal with that property group on the future of its landmark $1.8 billion Chifley Tower and Plaza in the heart of Sydney.
The fresh activity continues the run of offshore buying that has characterised the year, with purchasers ranging from Hong Kong tycoons to Singapore-based trusts and investment houses picking up a swag of the country’s best towers as mainland Chinese buying fades.
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Locals including Charter Hall and Centuria have also bought up with Dexus, GPT and Mirvac also bulking up their development pipelines, although concerns have emerged about whether the office cycle is peaking.
While experts believe the cycle of yield compression has almost come to an end they are forecasting that rising income will spur returns next year, with Brisbane and Perth shifting into recovery mode.
In the latest GIC deal, it is backing the Primewest Counter Cyclical Trust’s purchase of Perth’s premium grade Exchange Tower from its joint owners, the AMP Capital Wholesale Office Fund and a smaller Primewest syndicate.
Exchange Tower on Perth’s The Esplanade.
Primewest had picked up a half-share in the building in March 2016 in a deal valuing the entire complex at $227m. At the time more than a third of the 34,479sq m building lay vacant.
The owners slashed vacancy from 37.6% to 19.8% in the first six months and then to under 12%.
They also undertook capital works, including refurbishing the ground floor lobby and installing new lifts, with further upgrades to be finished with GIC’s support.
Primewest director John Bond says the vending trust was originally established to be a counter-cyclical trust with an initial term of four years but sold after interest from overseas investors wanting to capitalise on the next phase of Perth’s growth.
Primewest and AMP Capital undertook a rigorous sale process and GIC had to beat investors from Australia, Asia and Europe in a four-round process.
The deal, flagged by The Australian in October, was struck at a core capitalisation rate of about 6.25%, and was brokered by Cushman & Wakefield’s Josh Cullen and JLL’s John Williams and Simon Storry.
It was the lowest yield achieved in Perth CBD but still indicates the city’s relative value compared with heated east coast markets.
GIC already backs Primewest in Perth and was behind its $175m purchase of the Quadrant building last year but Exchange Tower, a 40-storey office tower just off St Georges Terrace, is a step up.
The blue-chip tenant roster includes engineering group ARUP, Fujitsu, Patersons, Morgan Stanley, Knight Frank, Bell Potter, Allen & Overy, Bain International, Mitsubishi Australia, Mitsui and accounting firm RSM.
AMP Capital Wholesale Office fund manager Nick McGrath says investment by the exiting partners in a capital expenditure program and successful leasing campaign resulted in an outstanding asset.
This article originally appeared on www.theaustralian.com.au/property.
