Charter Hall sells EY building to Theo Samaras

Developer Theo Samaras has picked up an Adelaide office block from Charter Hall for $84.25m – the city’s largest office deal in more than a year.

Adelaide’s CBD office market has recorded its largest sale in more than a year, with local developer and investor Theo Samaras completing an $84.25m deal to acquire the EY building on King William St from funds house Charter Hall.

The final price reflects a yield of 7.6 per cent, compared to a like-for-like comparison of about 6.6 per cent when Charter Hall’s unlisted office fund picked up the tower five years ago from private equity group Blackstone for $82.25m.

In its latest quarterly report to investors, Charter Hall’s $1.6bn Direct PFA Fund reported that it had sold $163m of property in the three months to June – including the Adelaide tower – after they were identified as being non-core assets in the portfolio.

“Proceeds from the divestments will be utilised to manage gearing as well as funding a further tranche of redemptions,” the report says.

“Providing redeeming investors liquidity continues to be a key focus for the fund. Management will continue to curate the portfolio and divest assets that are in the best interest of all investors at all times.”

The EY building on King William St in Adelaide.

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 Adelaide transaction is the first major office building to be sold in the city’s CBD this year, and the largest deal since February last year when local syndicator Harmony Property Investments paid $130.5m for the GHD Building at Victoria Square.

Home to major tenants EY, engineering firm Jacobs and fintech Tiimely, the 15-storey A-grade tower on the corner of King William and Waymouth streets 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 and Jed Harley have 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.

The agents declined to comment.

The EY building 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.

A wave of new developments over the past two years pushed Adelaide’s CBD office vacancy rate to its highest level since the 1990s earlier this year, but the latest Property Council figures, released last week, suggest vacancies may have peaked with the rate easing from 19.3 per cent in February to 17.5 per cent.

Originally published as Charter Hall sells EY building to Theo Samaras