ADIA Sells Half-Stake in Sydney Office Precinct to Charter Hall for $351M

The Abu Dhabi Investment Authority has sold its 50 percent stake in a Sydney office precinct to Australian fund manager Charter Hall, with market sources indicating a deal value of A$500 million ($351 million).

A Lendlease-managed fund holds the other half-stake in the O’Connell precinct, a land bank bounded by O’Connell, Bent and Spring Streets in Sydney’s central business district and centred on the 36-storey 1 O’Connell Street tower. The sale by ADIA comes as the Emirati sovereign giant rebalances its Asia Pacific portfolio by exiting commercial properties and reallocating capital to alternatives like Vantage Data Centers and industrial specialist GLP.

JLL and CBRE represented the sellers in the O’Connell deal, which gives Charter Hall a half-interest in the precinct site, including the 1991-vintage 1 O’Connell Street and several smaller buildings. ASX-listed Charter Hall had no comment on the transaction.

“Sydney is becoming very difficult to get set in once again,” said Flint Davidson, CBRE’s head of office capital markets for the Pacific region. “There are very few opportunities in the core and what made the O’Connell precinct so appealing was the range of core-plus and value-add strategies that can be implemented.” 

Development Options

The O’Connell precinct is the fruit of a nearly decade-long accumulation of assets in the heart of the Sydney CBD, occupying a combined freehold site area of 6,177 square metres (66,489 square feet), according to JLL and CBRE.

The collection includes interests in five separate assets producing more than A$50 million in annual income. Charter Hall entered due diligence on the O’Connell acquisition in November, as first reported by The Australian.

“This strategic land bank presents investors with a range of options from value-add repositioning of the existing assets through to progression of the already advanced planning process for the city’s tallest premium office tower,” JLL Australia’s capital markets head and interim CEO, Luke Billiau, said in a September LinkedIn post announcing the sale campaign for ADIA’s stake.

Lendlease and ADIA had sought to redevelop the precinct with a 72-storey skyscraper as the new centrepiece. The Lendlease fund, APPF Commercial, had the right of first refusal to buy out ADIA’s stake but declined, as the ASX-listed group has been offloading assets in its managed vehicles under pressure from investors.

Strategic Shift

The latest deal continues a string of commercial asset sales by ADIA after divestments in China, Singapore and Australia over the last 12 months, as the trillion-dollar sovereign fund shifts to industrial and digital infrastructure bets.

Last February, the fund and joint venture partner Hines sold the One Museum Place skyscraper in downtown Shanghai to a fund backed by China Post Insurance in a deal said to value the project at as much as RMB 10.9 billion (then $1.5 billion). ADIA retained a minority stake in the 60-storey tower after previously holding majority ownership in the asset.

In November, ADIA agreed to sell its 70 percent stake in Singapore’s PLQ Mall to Lendlease Global Commercial REIT for S$246.8 million (then $189 million), with the SGX-listed trust’s Aussie sponsor retaining a 30 percent interest. Then December saw ADIA part with its stake in a Surfers Paradise mall and hotel complex in a deal said to value the Queensland property at A$370 million.

GLP announced in August that it had secured up to $1.5 billion in capital commitments from ADIA to support the next phase of growth at the Asian industrial player, and Vantage Data Centers revealed in November that it had closed on a $1.6 billion equity investment into its Asia Pacific platform led by ADIA and Singapore sovereign fund GIC.