Singaporean sovereign wealth fund snaps up stakes in two Barangaroo South towers

Singapore’s sovereign wealth fund has snapped up a stake in two massive Sydney CBD towers.

GIC will acquire a 25.1 per cent stake in the Lendlease International Towers Sydney Trust — which owns two Barangaroo office towers. Picture: Julian Andrews

Singaporean sovereign wealth fund GIC is putting its stamp on Sydney‘s commercial property market by taking a stake of just over one quarter in two massive Lendlease-developed towers in the Barangaroo South harbourside office precinct that are worth about $4.6 billion in total.

The move is one of the largest direct property purchases of this cycle and comes in the wake of a series of mega deals in the office market in which buyers including US private equity group Blackstone and Charter Hall have secured premium towers.

Blackstone picked up the trio of towers above and around Westfield Sydney in a $1.52bn transaction and Charter Hall took a half stake in the $1.8bn Chifley Tower and Plaza, and has ambitions to overhaul that precinct.

The deals are being struck at record low rates of return — an indicator of the strength of the prices being paid and the confidence of international buyers that Sydney’s office market will continue its run of rising rentals even as more buildings are developed.

GIC will acquire a 25.1 per cent stake in the Lendlease International Towers Sydney Trust — which owns two Barangaroo office towers — from the Canada Pension Plan Investment Board and the listed Lendlease (LLC).

GIC Real Estate chief investment officer Lee Kok Sun said the high-quality assets, in the heart of Sydney’s CBD, were “expected to generate attractive risk-adjusted returns in the long run”. “As a long-term investor, we will continue to seek good investment opportunities that will add value to our global portfolio,” he said.

The Australian revealed in February that Lendlease and the CPP Investment Board were looking to trim their stakes in the International Towers Sydney precinct.

Lendlease has interests in a all three towers but earlier this year also sold down a slice in Tower One to the Hong Kong Monetary Authority. It still had about 15 per cent of Tower Two and Tower Three, with the Canadian group holding an investment worth about $2bn in those buildings.

The sale saw Lendlease sell off an 11 per cent interest in the trust which owns the two towers, releasing about $334m of capital, also alleviating any pressure on the company’s balance sheet as it deals with writedowns on its engineering business.

The transactions on the stakes in the Barangaroo towers were tipped to set new benchmarks for Australian office property but the parties have not revealed the metrics.

Details are closely held as Lendlease ran an off-market process that saw the interests first offered to its existing investors.

The CPP Investment Board unveiled its venture with Lendlease and its Australian Prime Property Fund Commercial to develop and hold the waterfront office towers at Barangaroo South in 2012.

The venture committed $2bn with CPPIB committing half of the equity in what was its largest investment in a single real estate asset.

The Lendlease International Towers Sydney Trust has grown to become a $4.6bn entity.

As well as Tower Two and Tower Three it also owns the smaller timber office, International House Sydney at Barangaroo South, and the Towns Place Car Park.

Lendlease has a 15 per cent stake held on a 4.75 per cent capitalisation rate that had a book value of $515m at the end of June 2018.

Tower Two is an 89,200sq m tower with 41 levels and Tower Three is 38 levels with 82,000sq m. The 7500sq m International House Sydney will house Accenture in its six levels of office space.