Sydney’s ‘sale of the year’ falls through … for now
The property transaction billed the sale of the year — the offer of a half-stake in Sydney’s $1.8 billion Chifley Tower and Plaza — has been called off, for now, by vendor Singapore sovereign wealth fund GIC Real Estate.
The move comes after an international campaign generated record bids for the interest in the landmark tower.
Locals led by Lendlease’s investment arm on behalf of an international client have battled companies including Hong Kong’s Lee Kum Kee Group for the asset, which was tipped to set fresh benchmarks for Australian office towers.
Commercial Insights: Subscribe to receive the latest news and updates
While the biding came down to a handful of deep-pocketed parties, it is understood a sale could have been struck at a yield of under 4.5%, had it been concluded.
The building was keenly pursued as there was the potential to generate higher rents from the multi-let office tower as demand for city space surges and the building is one of the country’s best addresses.
There was also the potential to generate a higher income from the retail areas by overhauling them, as well as the longer-term potential to deal with GIC.
The Singaporean sovereign wealth fund, which had proposed remaining as half owner, will now keep full control.
Sydney’s Chifley Tower. Picture: Hollie Adams.
The chances of a deal being struck rapidly faded, partly due to uncertainty about the sale of the freehold of the Sydney’s landmark.
The leasehold expires on June 16, 2113, and the freehold owner would have significant weight in any negotiations on the future of that interest.
Colliers International is handling bids for the freehold but has refused to comment
The Australian last week revealed Charter Hall had made a play for the freehold, potentially positioning it to engage on the leasehold of the complex.
The freehold was offered for close to $100 million and may still trade, although Charter Hall may now be facing stiff competition for that interest.
While the parties have declined to comment on the secretive process, GIC could simply await an outcome on the freehold before again seeking to offload the leasehold stake.
Ideally, a global institution would seek to marry the 69,000sqm leasehold and the freehold interest, although the later produces only a peppercorn rent. GIC was selling the half stake in the leasehold via agents JLL and Cushman & Wakefield, which did not return calls about the process for the 44-floor complex.
The Chifley leasehold was structured in 1987 in a $306 million deal between the Hawke government and the late property and business tycoon Alan Bond.
A unit of the Kumagai Gumi group picked up the leasehold on the then-uncompleted Chifley Tower in 1990 for $405 million.
This article originally appeared on www.theaustralian.com.au/property.
