Charter Hall nabs Chifley Tower

Sydney’s landmark Chifley Tower and Plaza has become part of the Charter Hall empire.

Chifley Tower sports panoramic views. Picture: Hollie Adams

Sydney’s landmark Chifley Tower and Plaza has become part of the Charter Hall empire, with the listed group taking control of the $1.8 billion office building after striking a partnership with its owner, Singaporean sovereign wealth fund GIC.

In one of the largest deals of the property cycle, Charter Hall said two of its wholesale funds would acquire a half-stake in the famous asset at 2 Chifley Square, with the group to take on the asset and property management of the entire tower, lifting its funds under management to more than $33bn.

Charter Hall’s Prime Office Fund and its DVP wholesale partnership have formed a joint venture that will own Chifley Tower in co-ownership with GIC.

The sale marks a continuing high point in the office property cycle with the prices of both towers and rents at historically high levels, particularly in Sydney and Melbourne.

The purchase could show a capitalisation rate in the mid 4 per cent range but the analysis is complicated by Charter Hall also taking on management of the famed tower.

There is also the “marriage value” of owning the freehold — which a Charter Hall fund swooped on last year for $98.5 million — and the leasehold interest, held alongside GIC.

Charter Hall’s moves may also spur a broader play in the precinct, potentially including the adjoining Macquarie Street complex where the group owns the leasehold.

Charter Hall has acquired a number of prime office buildings in the past 12 months on the back of its belief in the strength of the market and that interest rates will remain lower for longer.

The market has already seen a series of outsized office deals, including US private equity group Blackstone acquiring the office towers above Westfield Sydney for $1.52bn and Dexus buying 80 Collins Street in Melbourne for $1.47bn.

Charter Hall Group chief executive David Harrison said the off-market transaction extended the company’s office platform funds to more than $15bn, while also extending a well-established 15-year relationship with GIC.

“We have used our diversified funds platform to bring two of our wholesale funds/partnerships together to form a joint venture with GIC to own one of Australia’s pre-eminent premium-grade office towers, situated on arguably the best prime CBD site in Sydney,” he said.

The listed group has a weighted average stake across CPOF and DVP of 8 per cent.

The property, occupied by a who’s who of corporate Australia, sports panoramic views, and is the best-known tower from the 1980s development boom.

The property, developed by the late entrepreneur Alan Bond before a Japanese company took on the project as he ran into strife, is a premium-grade office tower of 68,867sq m, with more than 5000sq m of prime Sydney CBD retail across lower ground, upper ground and first floor.

It has 42 levels of office space situated on the second-largest site area in the Sydney CBD.

GIC bought Chifley Tower and plaza in 2005 for $710m from indebted Japanese owner Matsushita Investment & Development Corporation.

The property is secured by a 4.3-year weighted average lease expiry with, weighted average rent reviews of 3.8 per cent, and is 98.3 per cent occupied and leased to blue-chip tenants including UBS, Investec, Sumitomo Mitsui Banking Corp and Morgan Stanley.

The Australian in February revealed that Charter Hall was in talks with GIC about a deal on the leasehold interest after last year reporting that the group had outmanoeuvred its rivals by buying the freehold.

That deal was brokered by Colliers International and came as Cushman & Wakefield and JLL marketed the half interest for GIC.