This article is from the Australian Property Journal archive
CANADA’S Quadreal, Charter Hall and Abacus Property Group have teamed up to buy 201 Elizabeth St in Sydney’s CBD for $630 million – the second major office transaction in three days after Charter Hall paid $900 million for Chifley Tower.
Quadreal and Charter Hall’s Deep Value Property Fund (DVP) partnership will acquire 68% of the freehold, tenants in common interest and Abacus will buy the remaining 32% as tenants in common.
Abacus will pay $201.6 million for its 32%, reflecting an equivalent market yield of 5.0% and circa $16,000 per sqm of net lettable area (NLA).
The property was sold by partners Dexus and billionaire Stan Perron’s Perron Group. It is expected to contribute circa $34 million in trading profits pre-tax in FY20 for Dexus and contribute a further circa $34 million in trading profits pre-tax in FY21.
Dexus and Perron had been looking to sell the asset for over five years. 201 Elizabeth was on the market in 2014 and was under diligence to an undisclosed Chinese developer for $400 million but the JV partners pulled the plug.
Dexus CEO Darren Steinberg said: “We are pleased to have achieved an excellent outcome for our 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.
Charter Hall CEO David Harrison said this off market transaction reflects the deep relationships we have across our platform with our investor customers, with capacity to fund major transactions in the Australian market whilst continuing our partnership relationship with Abacus.
“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.” Harrison said.
This is Charter Hall’s second significant acquisition in a week after purchasing a 50% stake in Chifley Tower for $900 million from Singapore’s GIC, and the group’s third in a month following the $830 million purchase of the Telstra headquarters in Melbourne.
Abacus managing director Steven Sewell said Abacus joined with Charter Hall in seeing long term fundamental value at 201 Elizabeth St.
He added that the asset is attractive as a repositioning opportunity as an A grade office. Last year Dexus and Perron gained approval to develop a 50-storey mixed-use hotel and residential apartments tower.
“The acquisition aligns with our strategic priorities and supports Abacus’ transition to a more constant annuity style, strong asset backed business model.” Sewell said.
Originally constructed in 1979, the A-grade commercial building comprises 34 levels of office accommodation over 36,983 sqm of net lettable area (NLA), above a lower ground food court (12 retail tenancy areas over 1,428 sqm of NLA) and two levels of basement parking for 169 cars.
The property is set on a 3,901 sqm site with three street frontages to Elizabeth, Park and Castlereagh streets. It is 99.9% occupied and benefits from average rent reviews of 3.99% per annum and a 4.5 star NABERS Energy rating.
This latest transaction follows a strong 2019 financial year. A recent report by Cushman & Wakefield found commercial property transactions soared by 22% in FY19 to $42.6 billion. It was underpinned by office deals which accounted for $23.1 billion of total sales, up 22.6%.
Office investment volumes were highest in New South Wales, at $10.2 billion, with Sydney remaining the most active market for deal.
Notable transactions include Blackstone paying $1.52 billion for the 100 Market St and 77 and 85 Castlereagh St towers; Hong Kong billionaire Francis Choi bought out Cromwell to take full ownership of Northpoint Tower for $300 million; as did Dexus with co-owner GPT for the MLC Centre for $800 million; GPT forked out $531 million for a 25% interest in the Darling Park 1 & 2 and Cockle Bay Wharf complex; US fund manager Starwood Capital and Arrow Capital bought The Zenith Centre for $438.2 million, and Charter Hall spent $804 million on two King Street Wharf office buildings.
GPT’s unlisted Wholesale Office Fund agreed to exercise its pre-emptive right to buy out 2 Southbank Boulevard on Melbourne’s city fringe for $342 million.
