Charter Hall and GIC in Chifley Tower talks

Charter Hall is negotiating with GIC about its wholesale funds taking a half-stake in the leasehold of Chifley Tower.

Chifley Tower in Sydney. Picture: Hollie Adams

Charter Hall is negotiating with Singaporean sovereign wealth fund GIC about a play that could see its wholesale funds take a half-stake in the leasehold of the $1.8 billion Chifley Tower and Plaza, potentially spurring a broader play in the heart of Sydney’s central business district.

A Charter Hall fund secured the freehold title of the prestigious tower for $98.5 million in December, shortly after GIC withdrew the half-interest in the leasehold of the property from the market, ending what had been billed as the largest commercial property sale of the year.

GIC said at the time that bids had not reflected the tower’s premium value, but it may now be in a position to deal with Charter Hall because working with the local group could also give it greater certainty around the title, giving it the confidence to spend on the tower.

Charter Hall’s control of the freehold could also allow it to pursue a broader scheme for the area, potentially including an ­adjoining Macquarie Street complex where it owns the leasehold.

The group owns the long-term leasehold of 167 Macquarie Street, and that 19-level building could sustain further development — probably a new tower.

Meanwhile, the retail element of the Chifley property could also be overhauled if Charter Hall and GIC teamed up. A larger scheme could see the floor space from the Chifley site used in a new project on the site of the Macquarie Street tower.

Charter Hall, which has close ties to the Singaporean fund, for which it manages a counter-cyclic office mandate and another major office fund, declined to comment, as did the Asian group.

While the talks are understood to be at a preliminary stage, Charter Hall could bring into play both its development and funds management skills to realise the overall site’s value at a time when office rents and values in Sydney are soaring. The tower’s freehold was bought by the Australian group’s $5bn wholesale fund, the Charter Hall Prime Office Fund, and at the time it was seen as likely to see it work closely with GIC.

It not known whether this fund, another existing fund or a mandate client would seek to buy the stake in Chifley Tower.

Any project could take the form of a joint venture and would be in keeping with GIC’s tie ups with Dexus, where it is backing a $2bn industrial property fund, and Vicinity, where it has a $1.1bn retail property venture.

Charter Hall’s move on the freehold was finalised a week after the sale of a half-stake in the $1.8bn leasehold interest of the 44-storey tower was called off by GIC. The freehold site at 2 Chifley Square spans 6438sq m and ­accommodates the 94.6-year leasehold for Chifley Tower, which comprises a 70,000sq m premium-grade office tower.

Charter Hall has been backing its belief that Sydney’s office ­market is in a growth phase. Last month its funds bought two towers in the city’s Shelley Street from Brookfield for $804m.