Charter Hall buys second Sydney tower in a week

Charter Hall is on the road to a $35bn empire after topping its Chifley Tower move with a new Sydney building buy.

Artist’s impression of 201 Elizabeth Street Sydney. Supplied

The listed Charter Hall Group is on the road to managing a $35 billion property funds empire, after buying a Sydney tower overlooking Hyde Park for $630 million within days of snaring control of the city’s landmark Chifley Tower and Plaza.

In the latest purchase, Charter Hall said it had set up a new partnership between two of its wholesale partnerships and the listed Abacus Property Group to buy the office tower at 201 Elizabeth Street.

The Charter Hall funds will take a 68 per cent interest and Abacus will buy the remaining 32 per cent via a tenants in common structure.

The purchase will occur in two tranches, with three quarters of the total purchase price payable by mid-November and the remaining quarter subject to a put and call option expiring at the end of October 2020.

The office tower was sold by the listed Dexus and the private Perron Group, which had earlier flagged transforming the site into a $1 billion luxury hotel and apartment project.

The buyers will now look to reposition the landmark A-Grade building that has 34 levels of office space, a lower ground food court and two levels of basement parking.

The property sits on a large CBD north eastern corner site of 3,901sq m with three street frontages to Elizabeth Street, Park Street and Castlereagh Streets,.

The new Pitt Street metro station, slated to open in 2024, will also be opposite the property. It is 99.9 per cent occupied and benefits from average rent reviews of 3.99 per cent per annum, although rents could be hiked now that the hotel and apartment plans have been shelved.

Charter Hall is taking a bullish view on office markets. On Wednesday, two of its funds struck a partnership with Singaporean sovereign wealth fund GIC that saw the listed group take control of Sydney’s $1.8bn Chifley Tower building.

Charter Hall chief executive David Harrison said the off-market Elizabeth Street transaction reflected the deep relationships the group held in the market, while also continuing its partnership relationship with Abacus. The pair have also made a separate takeover bid for the Australian Unity Office Fund.

“The Charter Hall partnerships comprise the existing DVP partnership with a new partnership formed with one of Canada’s largest pension fund-owned property groups, Quadreal,” he said.

Abacus said its share cost about $201.6m and cited the tower’s attraction as a repositioning opportunity and its shift towards a more constant annuity-style strong asset-backed business model.

The property sale was handled by Knight Frank and Savills, and the tower was acquired on a market yield of about 5 per cent.

Dexus said the sale was expected to contribute about $34m in trading profits pre-tax this financial year and to contribute a further $34m in trading profits pre-tax in fiscal 2021, as the option was exercised.

Dexus chief executive Darren Steinberg said the group had achieved an “excellent outcome” for its investors without taking on any development risk.

“We added significant value by securing approval for a state significant development application on the site and expect to recycle the capital realised from the divestment into higher return opportunities,” he said.