Charter Hall opts for Sydney tower stake swap in $500m asset deal
Charter Hall CEO David Harrison. Picture: Hollie Adams
Property funds house Charter Hall has bolstered two of its key office vehicles via a deal in which they will swap half stakes in major Sydney office towers worth $500m in total.
The David Harrison-led company had been on a buying spree, targeting mainly long leased assets but has also been reworking its existing holdings, partly to realise their development potential.
In the latest play, the company’s $2.7bn Direct Office Fund has swapped a half interest in 68 Pitt St for a half interest in 9 Castlereagh St that was held by the $8bn Charter Hall Prime Office Fund. The trusts involved will hold on to their remaining half stakes in each tower.
The move will upweight the CPOF wholesale fund to a future strategic site and see the predominantly retail investor DOF fund upweight to a modern A-grade CBD building. The transaction will also diversify both vehicles and likely reflect fresh metrics in the Sydney office market once details are released.
There have been relatively few open market sales in the city in the last half but asset values at the top end have strengthened with an expected flight to quality by tenants. Lockdowns have yet to deter investors who are still chasing exposure to major city blocks and observers are keen to see the pricing on the deal. The Pitt St tower was held at $256m at the end of December.
Both sales reflect sub-$20,000/sq m NLA prices compared to the recent 200 George St sale to Mirvac at $29,000/sq m.
The office tower at 9 Castlereagh Street, Sydney. Picture: Bob Finlayson.
The tower at 68 Pitt St is a B-grade asset in the Sydney CBD core precinct and is 55.3 per cent occupied. The B-grade tower was built in 1965 and refurbished in 2011. The 26-level tower spans 14,224sq m and sports a weighted average lease expiry of about 2.3 years.
The building’s tenants include Citigroup and NIB, however it sits on a prime corner and is set to benefit from the recently announced Hunter St station for the Westmead to CBD metro line due for completion in 2030.
The block at 9 Castlereagh St is a Harry Seidler-designed landmark office tower featuring a unique internal light well and variety of floor plates. The property has 31 upper office levels, ground floor retail incorporating a cafe, a childcare facility at the rear and basement parking for 78 vehicles.
The A-grade tower was built in 1989 and spans 21,032sq m. It sports a weighted average lease expiry of three years and major tenants include R/GA Media Group and Compass. The tower is about 95 per cent occupied.
