Charter Hall closing in on Chifley Tower
Charter Hall looks set to tighten its grip on Sydney’s robust office market, with the fund manager in due diligence to acquire a $900 million stake in the leasehold of the $1.8 billion Chifley Tower.
Singapore’s sovereign wealth fund GIC could soon offload its half-share in the leasehold of the landmark, 50-storey tower after it withdrew it from the market late last year following concerns about uncertainty in the sector.
Sources say the acquisition would be worth about $900 million and would likely be struck on a yield of under 4.5 per cent. The leasehold runs out in June 2113. Charter Hall declined to comment.
Not only is the fund manager closing in on Chifley Tower but it is also undertaking due diligence to buy Telstra’s Melbourne headquarters in a deal said to be worth as much as $800 million.
With Telstra’s HQ at 242 Exhibition Street around the same ballpark price as the leasehold stake in Chifley Tower, it’s speculated the two mooted deals could be linked, with GIC potentially freeing up money in Sydney to buy the Melbourne property and using Charter Hall as its manager.
If a deal goes ahead on the 43-level tower at 242 Exhibition Street, it’s thought it would sell on a yield of about 4.5 per cent.
Should Charter Hall acquire the half-stake in Chifley Tower’s leasehold it will have further consolidated its exposure in Sydney’s financial district. Its Prime Office Fund owns the leasehold interest in the adjoining Gresham Building at 167 Macquarie Street.
GIC had originally engaged JLL and Cushman & Wakefield last year to sell its 49.9 per cent stake in the leasehold of the tower.
Big-ticket assets
Charter Hall’s Prime Office Fund has already secured the freehold title of the 70,000-square-metre, premium-grade office tower, which GIC offloaded in December for $98.5 million.
Charter Hall has been a bullish contender for some of the country’s big-ticket property assets of late, a sure sign of its confidence in the CBD office markets, particularly in Sydney and Melbourne where demand for space is at record highs.
The office markets in the two biggest cities are recording vacancy rates of 3.7 per cent – a rate not seen since the late 1980s – according to JLL’s latest figures. Yields have now fallen well below 5 per cent.
Outside of the country’s two biggest markets, Charter Hall is also in due diligence to buy a commercial office building in Canberra for about $105 million, which is part of Oxford Property’s sell-down of some of the Investa Office Fund portfolio.
Charter Hall also had its sights set on GIC’s $1.48 billion mixed-use precinct at 80 Collins Street before losing out in a bidding war to Dexus this month.
At the beginning of this year Charter Hall bought another two office buildings in Sydney, in the city’s King Street Wharf precinct, in a massive deal worth $804 million.
The two towers, at 10 and 12 Shelley Street, are the only two freehold office buildings in the precinct, and were offloaded byCanadian giant Brookfield.
