China’s Sovereign Wealth Fund Buys 50% Stake In Sydney Office Tower For A$925m
AUSTRALIA – China Investment Corporation (CIC) has acquired an additional 50 percent interest in Sydney’s Grosvenor Place for A$925 million, reported The Australian on Thursday (19 November).
The sellers are real estate giant Dexus (37.5 percent stake) and Canada Pension Plan Investment Board (12.5 percent stake). They divested their stake at a 5 percent discount based on the commercial property’s book value as of 30 June 2020.
The transaction was negotiated by property consultancies JLL and CBRE. The former’s team consisted of Simon Story, Luke Billiau, and Rob Sewell, while the latter was represented by Stuart McCann, Simon Rooney, and Flint Davidson.
However, the major office deal has not yet been greenlighted by the country’s Foreign Investment Review Board.
While the transaction comes amid heightened political tensions between Australia and China over security and trade, the deal is not deemed contentious as CIC already owns a 25 percent stake in the iconic 44-storey office tower.
Once the deal is completed, China’s sovereign wealth fund will hold a 75 percent interest in the commercial property, while the remaining stake is owned by the Commonwealth Super Corporation, the pension fund for Australia’s civil servants and armed forces.
CBRE’s Head of international capital for Pacific and Southeast Asia, Stuart McCann, revealed that the sale process for Grosvenor Place uncovered new foreign players in Australia’s office property sector (i.e. CIC competed with rival pension funds).
“These investors are actively seeking strategic and long-term partnership stakes in core Sydney office property, a trend we see continuing as assets which have traditionally been tightly held continue to become available,” he added.
Moreover, the major transaction is expected to trigger a frenzy of deal-makings across central business districts in the country. It also follows recent asset divestments by Dexus collectively priced at A$803 million that have mostly been at or above book value.
Although the COVID-19 pandemic has negatively affected office assets in the lower end of the market, the best office properties continue to attract robust interest from investors who are anticipating a rebound in the market after the current downturn has been surmounted.
Grosvenor Place has an occupancy rate of 89 percent, but it has a weighted average lease expiry (WALE) of 3.4 years, as anchor tenant Deloitte will relocate to a new office tower being constructed by AMP Capital.
Still, Dexus revealed that the prime commercial property gave it an annualised return of roughly 12 percent since it purchased a stake in the tower in 2013.