Charter Hall chases backer for $3bn luxury tower

The property funds manager is seeking a capital partner to develop a luxury apartment and hotel complex overlooking Sydney’s Hyde Park valued at as much as $3bn.

An artist impressions of Charter Hall's hotel and apartment development planned for 201 Elizabeth Street in Sydney.

Property funds manager Charter Hall has started a process to find a capital partner to back the development of a luxury apartment and hotel complex overlooking Sydney’s Hyde Park with an end value of about $3bn.

The move will showcase the company’s ability to use its development and fundraising prowess and take on a large-scale luxury project on the Elizabeth Street site that now accommodates one of the city’s tallest office towers.

The existing building at 201 Elizabeth Street in Sydney.

The project’s large scale has drawn interest from the global players that have also backed large-scale redevelopments at Circular Quay and Barangaroo. Charter Hall is chasing a deep-pocketed institution or a strategic partner that could back it as it takes on demolishing and rebuilding 201 Elizabeth Street as one of the country’s best luxury projects.

The striking new complex would be a dramatic addition to the city skyline and also show Charter Hall has the capacity to be fund manager and development partner on landmark living projects on the sites of existing offices.

With a property empire topping $80bn, Charter Hall has turned its attention to maximising the value of its holdings, with the city office tower long mooted as a potential site for luxury apartments and a hotel project. It is separately exploring build-to-rent projects in both Brisbane and Sydney as it seeks the best use for industrial and business parks in growth areas.

Earlier plans for the Elizabeth Street site had been first pursued by Dexus and the private Perron Group, and they had approval for an earlier scheme, which Charter Hall has refined.

An artist impressions of Charter Hall's planned 55-storey mixed-use project overlooking Hyde Park.

It is planning to develop a 55-storey mixed-use development that will include both a 441-key luxury hotel comprising 26,234sq m of space, including amenities and function centre in a podium, and 264 residential apartments spanning 30,517sq m in the tower element above the podium.

There will also be high-end shopping and improvements to the public domain as well as underground parking, to make both the hotel and units accessible.

Charter Hall is seeking to tap global institutions and potential strategic partners as it prepares to take on the project. At the same time, it told industry partners that the office building was performing well and talks were at an early stage.

Real estate agency Cushman & Wakefield is handling the offer of the complex, with stakes between one-third, 50 per cent or even a complete divestment being considered.

Charter Hall took control of the property in 2019. At the time it set up a new partnership between two of its wholesale partnerships – one is its Deep Value Partnership and the other is a tie-up with Canadian company QuadReal – and the listed Abacus Property Group. The Charter Hall-led grouping bought the 40,000sq m office complex for $630m.

They had planned to reposition the landmark, A-grade, 38-storey office tower to capitalise on its access to transport precincts, including the new Gadigal railway station, and won approval to develop a new 11-storey podium extension in 2022.

The property sits on a large CBD northeastern corner site of 3901sq m with three street frontages to Elizabeth Street, Park and Castlereagh Streets, with an ideal north eastern aspect, which Charter Hall managing director David Harrison had previously compared to “Central Park in New York City with the added benefit of fantastic harbour views to the Heads”.

An artist impression of the development planned for 201 Elizabeth Street in Sydney, which has three street frontages.

It is also uniquely positioned directly across from Hyde Park, capturing natural light from all sides and eastern views to Sydney Harbour. The move is in keeping with the development of other towers in the area, with big names active.

Cbus Property is developing 111 Castlereagh, comprising 98 luxury residential apartments above a heritage podium that is being transformed into premium-grade office space, itself above and the expansion of Westfield Sydney’s luxury retail offer.

Sydney developer Deicorp is also developing a luxury apartment tower in the area with its 55-level Hyde Metropolitan project overlooking Hyde Park also attracting good sales. Designed by Candalepas Associates, it will have about 168 luxury apartments and a six-level podium comprising retail, commercial and residential communal areas.

Apartments in top projects are also selling at premium prices. About 80 per cent of apartments at Lendlease’s One Circular Quay have sold, and domestic buyers are most active. The Australian reported last week that Mary Salteri, the cashed-up daughter of the late construction magnate Carlo Salteri, paid $30m for an off-the-plan apartment. All up, about $1.5bn worth of units have sold in that tower, which is expected to be finished in the next 18 to 24 months.

Charter Hall’s large apartments on Hyde Park would appeal to the same pool of eastern suburbs empty-nester owner-occupier buyers, and private developers are already moving. Chinese-backed company Han’s Holdings Group in August sold a nearby site overlooking Sydney’s Hyde Park, for which it had a $3bn scheme.

It planned an 80-storey twin-tower scheme at 338 Pitt Street in the midtown precinct of Sydney’s central business district but sold the site to local developer Billbergia for more than $500m.

Other sites may come into play.

Shimao Group, controlled by Hui Wing Mao, in 2019 proposed an ultra-luxury tower overlooking Sydney’s Hyde Park that would be worth more than $1bn after the Chinese-Australian billionaire dumped plans to sell a half stake in the office block on the site.

Charter Hall declined to comment.