CIC Pulls Out of $674M Grosvenor Place Deal in Sydney as Blackstone Swoops

China’s sovereign wealth fund is abandoning its deal to purchase a 50 percent stake in Sydney’s Grosvenor Place office tower, with US private equity giant Blackstone reportedly stepping into the void as the buyer at similar price terms.

China Investment Corporation, commonly referred to as CIC, had struck an agreement last November to acquire the half stake in the 44-storey building for A$925 million ($674 million) via two separate transactions, picking up a quarter stake from Aussie REIT Dexus and another 25 percent from the Dexus office partnership fund.

Media accounts in July of this year said CIC had received approval for the transaction from Australia’s Foreign Investment Review Board, despite rising tensions between the two countries over trade and foreign affairs. But two sources in Australia with knowledge of the matter confirmed to Mingtiandi this past week that CIC is no longer pursuing the deal, after the turn of events had first been reported in the Australian newspaper and the Australian Financial Review.

The Australian reported that Blackstone had been lined up as a replacement buyer for the half stake in Grosvenor Place and potentially for an additional 25 percent stake already held by CIC and managed by local property group Mirvac (a further 25 percent is held by Commonwealth Superannuation Corporation). When contacted by Mingtiandi, representatives of Mirvac and Blackstone declined to comment.

Fund’s False Start

CIC’s abandonment of its bid for a bigger slice of the property at 225 George Street in The Rocks neighbourhood of central Sydney deletes from the record books what would have been Australia’s biggest commercial property deal of the year. The sovereign fund originally acquired its existing quarter stake in the 33-year-old tower as part of its A$2.5 billion 2015 acquisition of Morgan Stanley’s Investa office portfolio.

ASX-listed Dexus, which has 153 properties and A$32 billion in assets under management, had planned to use the net proceeds from the sale, representing a roughly 5 percent discount to the property’s book value as of 30 June 2021, to repay debt.

The doomed investment would have marked a reappearance on the global real estate stage for CIC, which had reported $940 billion in assets under management in 2018 but went largely quiet after a series of overseas acquisitions through that year.

In June 2017, the fund landed what was then the biggest property deal of all time by buying Blackstone’s European logistics portfolio Logicor for $13.8 billion. CIC exited its longtime investment in Blackstone in February 2018, having bought a $3 billion stake in the Manhattan-based firm in 2007.

In March, Bloomberg reported that CIC had undergone a leadership reshuffle after revamping its investment decision-making committees earlier this year.

Office Heating Up

Despite the uncertainty surrounding Grosvenor Place, Sydney’s office investment market has seen an uptick in activity as the COVID-19 emergency fades.

Just last week, Canada’s Oxford Properties and its local operating partner Investa welcomed Japanese property giant Mitsubishi Estate into a joint venture to develop a premium office building connected to Sydney’s future Pitt Street metro station.

The 39-storey office tower and retail precinct, known as Parkline Place, will feature 47,800 square metres (514,515 square feet) of office space and a further 1,290 square metres of retail upon completion in 2024.

Earlier this year, Investa joined a different Canadian investor, financial services firm Manulife, in a 50:50 partnership to acquire an under-construction Sydney commercial building for A$800 million. The 28-storey tower at 39 Martin Place is being developed by Australian banking giant Macquarie.

In another key office deal in the city, Singapore-listed AIMS APAC REIT in September agreed to purchase retailer Woolworths’ Sydney headquarters for A$463.3 million.