Singapore’s GIC Buys Canberra Office Bldg For Over A$300m

AUSTRALIA – Singapore’s sovereign wealth fund GIC has teamed up with Charter Hall to acquire the office building along 50 Marcus Clarke Street within central Canberra for slightly more than A$300 million ($219 million), according to a recent report from the Australian Financial Review (AFR).

The seller is Mirae Asset Global Investments, which divested the 12-storey commercial property at a loss, as the South Korean fund manager purchased the asset from CIMB in 2017 for A$321 million.

The latest selling price is understood to reflect the asset’s inherent leasing risk and does not take into account price growths seen elsewhere in Canberra’s upbeat office market, which is poised for a record year.

This is because the property is presently occupied by the Department of Education, Skills and Employment (DESE), which is looking for other office space to rent and could exit 50 Marcus Clarke Street in 2025 when its lease expires.

A reason for moving out is that the current premises were constructed about 10 years ago and only has net leasable area (NLA) of 40,000 sq m. And DESE has launched an expressions of interest tender for bigger brand new offices spanning from 60,000 sq m to 70,000 sq m – the space it needs to accommodate all of its Canberra staff in one complex.

“If there was no process and they extended their lease it would be worth A$400 million, but that’s not the way it has worked out,” said a local property agent.

Still, 50 Marcus Clarke Street’s initial yield of roughly 6.5 percent and passing net rent of A $20 million has been taken into account in the selling price.

Interestingly, GIC is understood to be paying for most of the latest deal, which is still subject to the approval of Australia’s Foreign Investment Review Board (FIRB).

Notably, Singapore’s sovereign wealth has become more active in Australia’s commercial property market and is slated to open an office in Sydney next year.

For instance, GIC is divesting a 50 percent stake in prime Sydney retail properties – The Galeries, the Strand Arcade, and the Queen Victoria Building – in a transaction valued at around A$550 million.

Meanwhile, supply of Grade A office space in Canberra has tightened, with vacancy levels falling from 6.4 percent to 3.5 percent in the 6 months to July, based on data from the Property Council of Australia.