GIC Buys 25% of A$4.3B Sydney Office Fund From Lendlease, CPPIB

GIC is acquiring just over a quarter stake in a A$4.3 billion ($2.9 billion) Sydney office fund from Australia’s Lendlease and Canada’s CPPIB, according to an announcement by the Singapore sovereign wealth fund.

The purchase gives the Singaporean sovereign wealth fund a 25.1 percent share in Lendlease International Towers Sydney Trust, an investment vehicle which holds holds a one hundred percent interest in a set of three prime office buildings in Sydney’s Barangaroo area.

The acquisition, which is subject to regulatory approval and expected to close in the third quarter of this year, comes just under two weeks after the Singapore sovereign wealth fund offloaded a 50 percent stake in Sydney’s tallest building, Chifley Tower, for A$900 million.

Investing in Sydney Office Assets

GIC Real Estate’s chief investment officer, Lee Kok Sun, said that the three properties in the trust were high-quality assets expected to generate attractive risk-adjusted returns.

GIC is buying into the CPPIB-backed Lendlease fund, seven years after the Canadian fund manager made an initial investment of A$1 billion in the then-undeveloped assets.

Lee added that, as a long-term investor, GIC is constantly seeking good investment opportunities to add value to its global portfolio.

Located on the waterfront of Sydney’s Barangaroo commercial district, the three properties are part of a larger scheme to develop the last remaining waterfront site in the city’s financial zone.

The portfolio includes International Tower Two and International Tower Three, the first office properties in the world to be awarded the highest WELL Building Standard for healthy and sustainable buildings.

Designed by architects Rogers Stirk Harbour and Partners and developed by the Australian property group, the pair of pill-shaped towers were topped out in 2015.

The third asset, the six-storey International House Sydney, is Australia’s first multi-storey office constructed from engineered timber.

Blue-Chip Tenants on Long Leases

Anchor tenants in the 178-metre tall Tower Two include Australian financial services group Westpac Banking Corporation and law firm Gilbert and Tobin, which occupy more than 80 percent of the 41-storey building’s 89,200 square metres (960,140 square feet) of net leasable area.

Seventy-five percent of Tower Three’s 82,000 square metres of net leasable area is occupied by Lendlease and KPMG, with the global accountancy firm in 2016 taking 15 storeys of the 38-storey building on a 16-year lease.

Professional services company Accenture is an anchor tenant in International House Sydney, a 6,719 square metre office built with timber sourced from sustainably managed forests.

No details have been disclosed regarding the dollar value of the 25 percent stake, but at the same time that Canada Pension Plan Investment Board made its A$1 billion investment seven years ago, Lendlease acquired a 25 percent stake for A$500 million, according to a Reuters report at the time.

Other investors, including Lendlease-managed Australian Prime Property Fund Commercial and two Australian Prime Property Fund Commercial investors, were said to have committed a combined A$500 million.

Lendlease’s Barangaroo South development also includes a third tower, known as International Tower One, which is comprised of 800 residential apartments and a hotel, none of which are part of GIC’s acquisition.

Sydney Office Transactions Slump

GIC is making its latest Sydney commitment as investments in office properties in Sydney fell to A$3.6 billion for the 12 months through June 2019 — less than half the volume of the previous 52 weeks, according to Savills.

The investment also closely follows the sovereign wealth fund’s A$900 million divestment of a 50 percent stake in the city’s Chifley Tower earlier this month.

GIC had acquired the Sydney skyscraper along with a resort on the Queensland Gold Coast in a joint acquisition with Morgan Stanley Real Estate Investing for A$800 million in 2005.

The Singapore giant’s acquisition shows its continued interest in the country following two big-ticket investments towards the end of last year.

In November, the sovereign wealth fund set up a A$2 billion unlisted trust with Australian REIT Dexus to invest in logistics properties, taking a 25 percent interest in the core portfolio.

A month before that deal, local media reported that GIC had won a tender to acquire a Perth office tower for A$230 million from owners AMP Capital and Primewest.

The acquisition of the 40-storey Exchange Tower, which was hailed as the highest-profile commercial property transaction in the western Australian city, was reportedly part of a mandate given by GIC to Australian investment managers Charter Hall and Primewest to invest up to A$800 million in Brisbane and Perth.