GIC Puts 50% Stake in Sydney’s Chifley Tower on Block for $650M

Singapore’s GIC is putting 50 percent of the Chifley Tower in Sydney on the market, according to the AFR and other media accounts.

The sovereign wealth fund is said to be asking A$900 million ($650 million) to part with half of its holding in Sydney’s tallest tower.

JLL and Cushman & Wakefield have been appointed to lead what is expected to be a lively contest after a record A$19 billion poured into office purchases in Australia during the 2018 financial year.

High Ground, Good Views

Chifley Tower stands 244 metres tall, with 53 storeys and 40 levels of offices, the restaurant on the 42nd floor converted to office space in 2017. The building has a total GFA of 90,000 square metres (969,000 square feet). Tenants include the Agricultural Bank of China, Blackrock, the Carlyle Group, DBS, the Korea Exchange Bank, Snapchat, Morgan Stanley, Sullivan & Cromwell and UBS.

The Tower, at the corner of Phillip and Bent streets, is built on one of the highest points in the city and is considered to be one of the best locations in the CBD, with views of the harbour and good access to key buildings and sites.

Record Setting Market

Despite a dearth of headline-levels purchases from mainland China, office purchases country-wide rose 46 percent from their FY 2017 levels to reach that record A$19 billion for fiscal year 2018, according to data from Colliers. Singaporean investors accounted for about 15 percent of the total. Sydney CBD sales were up 88 percent with A$10.8 billion of deals reported.

Notable transactions include 10 Spring Street, which went for A$270 million in September 2017, 130 Pitt Street, which sold for A$229 million in December, and 179 Elizabeth Street, which fetched A$265 million in May.

According to the Savills second quarter report, rents in the Sydney CBD were up 13.4 percent on year. In the second quarter, JLL ranked the Sydney CBD as number six in the region in terms of office rental values and reported that rental gains in the city were the second largest in the region on year. Capital values rose 10.9 percent on year in the Sydney CBD, according to JLL.

In an early 2018 report, Knight Frank said that the Sydney CBD was facing a supply drought with a vacancy rate far below the 10-year average as demand for space increased on strong employment and interest from foreign investors and unlisted funds.

A Storied Tower

The site, previously the location of the Commonwealth Government Offices, was bought by the legendary Alan Bond in 1998 for A$306 million.  Originally known as Bond Tower, the structure was  built at an estimated cost of A$1 billion and completed in 1992. The owner went bankrupt in 1992, and the asset went to Kumagai Gumi, the Japanese construction company.

GIC bought the building along with Morgan Stanley Real Estate Investing (MSREI) in 2005 for an estimated A$710 million from troubled Matsushita Investment & Development Corporation. In the same transaction, Morgan Stanley and GIC bought Royal Pines Resort on the Gold Coast, with a 330 room hotel and a 27 hole golf course.

Active But Only 1 Percent

The $390 billion-plus sovereign wealth fund has been active in the city, but its commitment to Australia has been overshadowed by growth elsewhere. In the year ended March 2018, assets in the country were 1 percent of the fund’s total, down from 2 percent a year earlier.

In December 2017, GIC purchased the 41-storey Santos Place tower in Brisbane from Permodalan Nasional Berhad (PNB), a Malaysian fund manager. Under its Ipoh portfolio, GIC has owned the Queen Victoria Building, The Galeries and The Strand Arcade in Sydney since 2003. In 2017, it agreed to swap 50% of those assets for 49% of Vicinity’s Chatswood Chase Sydney.

In May 2018, GIC teamed up with Tasman Capital Partners to acquire National Lifestyle Villages from Blackstone and Navis. In April, GIC was one of the backers of a $3.1 billion offer for Healthscope, an Australian hospital operator.