Charter Hall closes in on tower sale to Adelaide’s Theo Samaras

Adelaide’s Theo Samaras is running the rule over a CBD tower, with an offer that underlines the new realities facing office landlords.

The office tower on the corner of King William and Waymouth streets.

Charter Hall is closing in on another sale from one of its unlisted funds, in a deal that’s likely to underline the new realities facing office landlords.

Developer Theo Samaras is running the rule over Charter Hall’s office tower on the corner of King William and Waymouth streets in Adelaide, which the property funds house acquired five years ago for $82.25m.

Industry sources have told The Australian a similar, or slightly lower, figure is being negotiated between the two parties.

That would nudge the initial yield past 8 per cent, compared to a like-for-like comparison of about 6.6 per cent when Charter Hall picked up the property in 2019 from private equity group Blackstone.

If the deal proceeds, it would become the first major CBD office sale in Adelaide this year, and the latest in a series of disposals from Charter Hall’s $2bn Direct PFA Fund.

Last July Charter Hall blamed tough conditions in the office market for delays in meeting redemption requests from the fund, which focuses on government-anchored buildings.

It informed its investors at the time that it would need to satisfy their redemption requests through staggered payments over a period as it weathered a choppy commercial property market.

The fund has since sold off three assets including an $80m university building in the inner Sydney suburb of Kensington, Hobart’s landmark Lands Building, and an office and car park complex on Tank St in central Brisbane.

The Brisbane building sold for $73m to investment manager Alceon - $20m less than the $93m Charter Hall paid for the property via two of its unlisted funds in 2018.

Unlisted property trusts have come under pressure as office values tumble in the wake of higher vacancies and rising finance costs.

The Direct PFA Fund took a $175m, or 7.8 per cent, hit to the valuation of its portfolio of 20 buildings in the six months to December, according to its latest half-year report.

The Adelaide tower was expected to fetch close to $100m when it was listed for sale through Cushman & Wakefield and Colliers early last year, but a buyer could not be found.

Cushman & Wakefield’s Guy Bennett has since been working off-market to strike a deal between Charter Hall and Mr Samaras - a prominent developer behind a string of office buildings in Adelaide, including a $100m tower currently under construction on Franklin St.

Mr Bennett, Mr Samaras and Charter Hall declined to comment on the negotiations.

The 15-storey A-grade tower includes 12,616sq m of net lettable area, and is home to major tenants EY, engineering firm Jacobs and fintech Tiimely.

It is ­located in Adelaide’s City Central precinct, which also comprises the GPO Exchange tower – home to BHP – which is currently held in Charter Hall’s Prime Office Fund following its development in 2019, and the ATO building, which is jointly owned by Charter Hall’s Direct Office Fund and Long WALE REIT.

The ATO occupies close to 31,000sq m, or more than 80 per cent, of the Franklin St tower, but industry sources have told The Australian that Walker Corporation is likely to target the tax office for a potential move to a second tower being planned at Walker’s Festival Plaza development.

A wave of new developments over the past two years has pushed Adelaide’s CBD office vacancy rate to 19.3 per cent - the highest level since the 1990s.

However the latest figures from JLL, released last week, suggest vacancies may have peaked in the city, with the rate easing from 18 per cent in December to 17 per cent in March. Melbourne was the only city to report a higher figure of 18 per cent.

The national CBD vacancy rate was unchanged at 14.7 per cent.

Originally published as Charter Hall closes in on tower sale to Adelaide’s Theo Samaras