Singapore’s CIG keeps faith in Australian property with Perth swoop

The purchase is a sign of its confidence in Australia’s commercial property markets where it has been the heaviest investor since the outbreak of the coronavirus pandemic.

GIC is at the vanguard of a group of Asian investors punting that the country’s office towers will recover and the best properties will lead the way.

They have poured billions into the market, betting that the highest quality office buildings will win fresh tenants even if lower grade properties suffer from higher vacancy if they are unable to attract safety conscious city workers.

Big Singaporean companies including Mapletree and Ascendas have been buying through the crisis and local players including the funds houses Marprop and Ashe Morgan have also been buying towers, with some offshore support.

But GIC has made the biggest commitments to local commercial property in the wake of the pandemic and is targeting top assets that have been shaken loose by the crisis rather than hunting for bargains, which are thin on the ground.

The fund also backed Dexus as it bought a half stake in Melbourne’s Rialto Towers complex last April for $644m and has given a fresh mandate to funds house EG and is also supporting an ESR logistics development venture.

Its interest in logistics has also prompted suggestions it will be a contender for the Milestone Logistics portfolio which is being sold by US private equity house Blackstone in a $3.5bn offering.

Offices have been its main focus so far and in Perth GIC is buying into the Chevron tower at about $220m, which was ahead of its value before the crisis, and shows that despite poor leasing markets big funds are willing to pay up for Australian towers.

The project at One The Esplanade, Elizabeth Quay, will comprise 56,000sqm of space with the oil and gas giant taking about 78% of the space.

Brookfield bought the Swan River frontage from Chevron in 2019 under an agreement to develop a 29-level, 56,000sqm premium-grade office building including retail and restaurants.

Chevron Australia will be the anchor tenant, committing to a 15-year lease.

A half interest in the project was sold to funds house Invesco at the start of last year for about $400m and Brookfield will keep the last quarter interest in the tower.

Brookfield brings in capital partners to back its massive office developments even as they are under construction and will pour the proceeds into new local projects, including in Perth.

The deal highlights the strength of resources tenants and also would show a higher yield than similar buildings on the east coast, where trades have been struck at tight levels including on towers including interests in One Governor Philip and Macquarie Tower, and an impending deal on 1 Bligh Street.

Brookfield has a hefty development pipeline in Sydney, Melbourne and Perth, and has been selling down stakes to such buyers as AMP Capital, ISPT and Hong Kong’s HKMA.

The run of deals at the top end of the office market is beginning to spread to smaller buildings in the CBD and suburbs as direct investors bet that the property sector will recover from the coronavirus crisis.

Sydney-based funds manager Marprop Real Estate Partners last month snapped up a half stake in an office building near Wynyard station from Brookfield in a $140m deal.

Brookfield was an early mover in the precinct that has since drawn other developers including John Holland.

It capitalised on the lift in the area from its own $2bn Wynyard Place development that is coming online next year.

This article originally appeared on www.theaustralian.com.au/property