Public service super fund CSC to buy 75pc stake in Grosvenor Place for $1.35bn

Investors are chasing Sydney office assets.

The heavyweight Commonwealth Superannuation Corporation is poised to take full control of Sydney’s Grosvenor Place by exercising its rights to buy a 75 per cent stake in the tower in a $1.35bn deal.

CSC, which already owns a 25 per cent stake in the famous tower designed by Harry Seidler, is readying to exercise rights it holds to acquire the remaining stake, which is being sold by US private equity giant Blackstone.

That 75 per cent interest had been under offer from a consortium led by local office funds house Investa, which had teamed up with US group BGO to bid about $1.35bn for the interest.

However, that transaction was subject to CSC not exercising its pre-emptive rights, which is expected to occur shortly, and will mark the year’s largest office tower transaction.

The move is a dramatic play by CSC, which manages more than $70bn in funds and serves around 750,000 members, as it will see greater concentration in its direct property portfolio.

It holds other assets but the focus would be the Sydney tower which would be valued at about $1.8bn, and it still faces leasing challenges with vacancy levels of about 20 per cent.

Industry players said the move showed that the premium end of the office market was continuing to improve as the large commitment by local super funds had been unexpected.

The parties declined to comment.

Grosvenor Place.

The move leaves Investa and its partner BGO looking to invest more than $1bn, with a number of key assets in Sydney are in play. They include a half interest in Sydney Place, which is being offered by China’s Ping An, and Middle Eastern group ADIA’s half stake in the O’Connell precinct.

The Australian revealed that Grosvenor Place was in play in April, with US owner Blackstone exploring an exit from its 75 per cent stake.

The private equity group had famously swooped on an interest in the $1.8bn tower in Sydney CBD in an opportunistic deal in 2021.

Investa set up a club including its own wholesale fund and BGO to acquire Blackstone’s interest in the landmark tower.

The Investa platform, which is part-owned by Oxford Properties, brought the promise of adding value as demand for office space recovers at a time when few new towers are being built.

Blackstone has a model of buying, fixing and selling properties, and has signalled a shift away from offices into areas including data centres and living.

The US firm’s exit was on the cards since the time it bought into the landmark tower in 2021, when Chinese sovereign wealth fund China Investment Corporation pulled back from a planned deal to buy a 50 per cent interest from Dexus and Canadian pension fund partner CPP Investment Board.

As political tensions with China heightened, Blackstone effectively stepped into the Chinese fund’s shoes. It also acquired another 25 per cent from CIC, which had been overseen by Mirvac.

Blackstone has already undertaken a significant turnaround job on Grosvenor Place, leasing up some space that was left when Deloitte departed. But more is to be done.

The action on Grosvenor and other large sites shows that investors are concentrating on top-end transactions rather than lower grade stock.

The George St skyscraper sits on a major site adjoining Circular Quay, in the northern part of the Sydney CBD, and the complex has 44 levels of prime office space.

The tower, which was completed in 1987, incorporated environmentally conscious features long before sustainability became a widespread concern. It has a Carbon Neutral certification and a 6.0-star NABERS Waste rating.