Investa mulls selling stake in Telstra’s Melbourne HQ

Telstra’s office at 242 Exhibition St in Melbourne.
Telstra’s office at 242 Exhibition St in Melbourne.

Property funds manager Charter Hall Group is running the ruler over Telstra’s Melbourne headquarters as Investa weighs up selling a stake in the $800 million complex to the acquisitive listed group.

The building on the corner of Exhibition and Lonsdale Streets was purpose built for Telstra in 1991 and is synonymous with the telecoms company’s presence in Melbourne. It will now remain so until 2031 after it briefly sought a new building several years ago.

The landmark tower at 242 Exhibition St is one of the city’s most prominent and has come on to Charter Hall’s radar as it looks to boost its exposure to Melbourne’s strongly-performing office market.

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The tower is controlled by property group Investa, with its main wholesale fund owning the property alongside Canada’s Oxford Properties Group, which took over the once-listed Investa Office Fund last year.

In a show of Oxford’s flexibility, it is considering the disposal of its interest after picking up the $4.4 billion IOF office portfolio and then putting a separate $1.5 billion portfolio on the block.

Charter Hall is already buying one Canberra asset worth about $108 million out of the $1.5 billion portfolio that Oxford has on the block. But considering a sale of the Telstra building shows that rather than just selling smaller assets at a profit it may also offload larger towers at a premium.

Investa also consider selling its stake in the building to the acquisitive Charter Hall. But it may also keep its interest, sources say.

Buying into the building would be also in keeping with the closer relationship between Charter Hall and Investa, with the pair also looking to develop an office skyscraper in Brisbane.

The Telstra tower in the northeastern sector of the Melbourne CBD is an A-grade building comprising 65,913sqm of office space and is one of the city’s best.

It has 43 levels as well as a retail arcade, food court, theatrette and a conference centre. The complex sits close to major transport links including parliament station, trams and buses, and is close to parks, hotels, restaurants, cafes and leading retail areas.

The building’s value has been rising, with IOF lifting its valuation on its half stake in 242 Exhibition Street by $21.5 million, or 7.1 per cent, to about $326.5m, last year.

Telstra has an 11-year lease starting in 2020 and for about 63,372sqm, comprising 59,676sqm of office space and 3,696sqm of conference, training and ancillary areas.

Charter Hall’s interest in the tower stake is in keeping with its focus on long leased assets as it seeks to build up a roster of such buildings for both its listed specialist real estate investment trust and its wholesale funds.

The powerful Charter Hall operation is separately readying to develop one of Melbourne’s most substantial office precincts with its $1.5 billion 555 Collins St twin-tower project set to lead the next phase of the city’s mid-town development surge.

The group is pitching its two towers of about 80,000sqm as offering the most advanced workplace technologies. It is seeking to carve out a point of difference against rivals including Cbus Property, which has begun works on its own $1 billion-plus project in Melbourne.

Charter Hall is seeking to replicate its success at the city’s Wesley Place precinct, which it will finish next year, and secure a major tenant precommitment for that new project.

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