Charter Hall snares $229m Department of Education tower in Parramatta
Charter Hall Group’s Prime Office Fund and Direct Office Fund have purchased Dexus’ 105 Phillip Street office tower in Parramatta, in western Sydney, for $229 million.
As foreshadowed in The Australian Financial Review, Charter Hall beat a long list of domestic and international contenders for the 15-storey storey tower, to be constructed by Built and completed in 2018.
The deal, which involves Dexus maintaining management rights over the building for another five years, was struck on a yield of just below 5.3 per cent, which has repriced the western Sydney city’s office market, pushing values even higher.
The 25,000-square-metre, A-grade office space is set to be the headquarters for the NSW government’s Department of Education and will be leased for 12 years.
Charter Hall Group executive for office Adrian Taylor said the opportunity to acquire the asset was consistent with the group’s strategy of buying assets with a long weighted average lease expiry, leased to strong tenant covenants, underpinning high-quality cash flow and in strategic locations.
“The market is extremely competitive for high-quality, long WALE investment assets, particularly leased to blue-chip tenants,” Mr Taylor said.
“We see this investment, which extends our relationship with the NSW government as a tenant customer, as an exciting opportunity to create another landmark office tower in Parramatta CBD, which will benefit from significant infrastructure upgrades.”
CI Australia directors for capital transactions in Australia Michael Stokes and Rebecca Roberts brokered the deal.
“I think there is no doubt this will reprice Parramatta,” Ms Roberts said.
She said the strong domestic bidding was competitive against the big money from South Korean and Singapore-based investors.
“We found the domestic funds were actually better able to understand the buy and fund through concept, which some of the offshore funds could not accommodate in terms of risk,” Ms Roberts said.
CPOF fund manager Craig Newman said the purchase would build upon the successful development of the Western Sydney University Parramatta CBD campus by his fund.
“The acquisition of 105 Phillip Street, which has been de-risked through the fixed price building contract and NSW government pre-lease, represents a high-quality addition to the CPOF portfolio,” Mr Newman said.
For Dexus, some of the proceeds will be received this month, contributing to full-year trading profits. The remaining proceeds will be received on practical completion of the development, contributing to full-year 2018 trading profits.
Dexus chief executive Darren Steinberg said the sale demonstrated how the group had leveraged its capabilities in development, leasing and transactions to package an asset that would deliver trading profits in 2017 and 2018.
“We’ve worked with local authorities and one of our key customers to develop a customised quality workplace, while maintaining our customer relationship through the ongoing management of the property.”
