Charter Hall into sixth state with $82m tower

Charter Hall’s direct property unit has snapped up a major Adelaide tower from Blackstone for $82.25 million.

The building at 121 King William Street in Adelaide.

Charter Hall’s direct property unit has bolstered its holdings, snapping up a major Adelaide tower from private equity group Blackstone for $82.25 million.

The off-market purchase of the tower at 121 King William Street is the largest deal in the city this year. The building will be placed in Charter Hall’s unlisted PFA Fund.

There was a series of office tower purchases in the city last year, with a venture between property executive Chris Lock and investment house Wingate buying 77 Grenfell Street for about $103.5m.

The city has already drawn investment from the likes of Centuria Capital Group, and the Lederer Group and Mapletree, the property investment arm of Singapore’s state investment fund Temasek.

The King William Street property is an A-grade building spanning 12,410sq m that sits in the CBD and has a strong underlying covenant base.

The building is mainly leased to Ernst & Young (that deal comprises 22.6 per cent by gross income) and Jacobs Engineering Group (15.1 per cent by gross income).

A further 641sq m of space is under heads-of-agreement to lease, which will make it almost fully occupied.

The tower sits in the City Central precinct, which also comprises 26 Franklin Street, owned 50-50 by the Charter Hall-managed Direct Office Fund and Long WALE REIT, and 10 Franklin Street, that is fully owned by Charter Hall Prime Office Fund.

Blackstone had picked up the tower as part of its $500m-plus purchase of South Australia’s Motor Accident Commission portfolio in 2017.

Adelaide’s economy has been performing well and positive office leasing demand and withdrawals in stock have placed downward pressure on office vacancies.

The city’s prime vacancy rate has trended down since 2016, reaching 9.7 per cent in the first quarter, a dip from 12.1 per cent in the previous quarter.

The PFA fund, with a portfolio valued at $966m, owns 14 office buildings in capital cities across six states and the ACT.

The head of Charter Hall Direct, Steven Bennett, said the acquisition was consistent with the fund’s strategy, was its first asset into the “core of the Adelaide CBD and comprises a multi-tenanted, quality property”.