Singapore’s GIC is buying a half slice of an A$800 million ($568.3 million) Melbourne office development from Charter Hall after the Australian property giant secured Amazon and Aware Super, the third largest pension fund in the country, as anchor tenants.
Beyond the leasing milestones, ASX-listed Charter Hall attributed the investment in 555 Collins Street, a 48,000 square metre (516,668 square foot) office block in Melbourne’s central business district, to the quality of the Gensler-designed project, which is targeting a 6 Star rating under Australia’s Green Star regime for sustainable buildings, along with a 5 Star rating under its NABERS equivalent and a Platinum grade on the WELL chart for healthy properties.
“Our development and asset management teams have achieved leasing with major commitments from Amazon and Aware Super, whilst further leasing is well advanced, highlighting the bifurcation we have expected with tenant customers increasingly attracted to brand new, state-of-the-art space to satisfy the expectations of their people and customers,” Carmel Hourigan, chief executive of Charter Hall’s office division said in a statement.
The sovereign wealth fund purchased its 50 percent interest in the Melbourne project from Charter Hall’s Prime Office Fund (CPOF), with GIC’s latest investment coming just eight months after the two firms had jointly purchased an office asset in Canberra, as Singaporean property investors continue to head to Australia in search of returns.
Completion Expected in 2023
A third of the building, which is part of an 84,000 square metre, twin tower office complex, has already been pre-leased to Amazon, while the A$150 billion retirement pension fund Aware Super agreed to take up six floors in the building as it consolidates offices scattered across three locations.
GIC is buying into the project as construction is well underway on the 34-storey structure at the junction of Collins Street and King Street in Melbourne’s central business district with completion slated for sometime in 2023.
Charter Hall had acquired the 3,000 square metre site from Singapore’s Fragrance Group for A$140 million in 2018 after the hotel investment specialist had failed to secure approval for a proposal to develop a combined residential, office and hotel complex on the plot.
Charter Hall is developing 555 Collins Street as the first phase of a project which also includes 55 King Street, an adjacent office development that will deliver 32,000 square metres of additional leasable space when completed.
The two-tower complex will also include 2,300 square metres of retail space, with the entire project estimated to be worth A$1.5 billion ($1.07 billion) when finished.
“We’re delighted to extend our 22-year partnership with GIC offering one of our CPOF investors the opportunity to co-own what we believe will be one of Melbourne’s pre-eminent new office precincts,” said Charter Hall managing director and group chief executive officer David Harrison.
Amazon announced its pre-lease commitment to 555 Collins Street when construction started in April 2021. Its Amazon Web Services division is said to be occupying up to 14,000 square metres as it relocates out of an existing office at 8 Exhibition Street, based on local media reports.
Aussie superannuation fund Aware Super also committed to lease about 8,000 square metres in the building to consolidate its offices currently situated in three different locations.
A report by The Australian said GIC is investing in 555 Collins Street at an estimated cap rate of below 4 percent. Charter Hall said the deal has been concluded directly between the two parties.
Long Term Partners
While a company representative declined to disclose GIC’s investment, Harrison said the deal would provide its flagship office fund with cash for developing the second stage of its Collins Street project, as well as to support Charter Hall’s acquisition of a half-interest in Melbourne’s Southern Cross Towers last month.
Local news reports said GIC and the Sydney-based property investment manager initially planned to make a joint bid for the pair of office blocks at 111-121 Exhibition Street but the Singaporean fund eventually backed out while Charter Hall went ahead to acquire the project solo.
The Collins Street venture follows GIC and Charter Hall’s joint acquisition late last year of 50 Marcus Clarke Street in Canberra from South Korean finance firm Mirae Asset Global Investments for A$335 million.
In 2020, the two companies worked together to acquire a 49 percent interest in a portfolio of convenience stores from Aussie oil refiner Ampol for A$682 million.
Aussie Office In Focus
GIC, which ranked as the world’s most active state-owned sovereign wealth fund in 2021 with about $34.5 billion invested in 110 deals, has helped lead a wave of Singaporean investments in Australia which, over the past year, has nearly doubled the level reached in 2020.
Following GIC’s example, SGX-listed CapitaLand Investment expanded its presence in the Melbourne CBD in June with its A$325 million acquisition of an office tower at 120 Spencer Street. CLI’s new 22-storey prize sits just opposite 555 Collins Street.
In February, the property division of Straits Trading paid A$150 million to pick up a set of assets in the Docklands area west of Melbourne CBD, including a pair of freehold office buildings at 1010 La Trobe Street and a neighbouring property at 192 Harbour Esplanade.