GIC Takes Half Stake in $1.5bn Charter Hall Office Project

Real estate investment group Charter Hall has divested a 50 per cent stake in its $1.5-billion office development at 555 Collins Street to Singapore’s sovereign wealth fund GIC after the deal received FIRB approval.

The mammoth 84,000sq m office project is currently being built in one of the faster-growing areas of the CBD—the midtown section of Collins Street.

It was one of several major projects fast-tracked by the Victorian government in an effort to get building and development projects moving as quickly as possible during the pandemic.

Charter Hall chief executive David Harrison said the deal would extend the group’s 22-year partnership with GIC, offering it the opportunity to co-own one of Melbourne’s pre-eminent new office precincts.

“This transaction has provided our flagship office wholesale fund, CPOF, with capital to expand our Melbourne office portfolio via the acquisition of Southern Cross Towers and to further invest in stage two of 555 Collins Street, when appropriate,” he said.

The 3000sq m site, strategically positioned on one of Melbourne CBD’s key intersections—surrounded by other premium grade office towers such as Rialto, 530 and 567 Collins Street—was acquired in 2018.

In early 2019 the group lodged plans for and subsequently received planning approval for the state-of-the-art, twin office tower precinct inclusive of 2300sq m of retail.

The towers will adjoin with the CPOF owned 55 King Street, which Charter Hall has owned since 2016, to create 50 metres of northern frontage on Collins Street, 100 metres of frontage on King Street and direct access to Flinders Lane.

▲ A render of the two-stage premium office development Charter Hall is building at 555 Collins Street. Image: Cox Architecture

The precinct’s first $750-million tower is currently under way and due for completion in 2023, comprising 34 levels and 48,000sq m of premium grade lettable area.

Deep-pocketed global tech giant Amazon agreed to give up its existing space on Exhibition Street at the top end of the city to move into larger digs at 555 Collins Street taking 15,000 square metres of tech-enabled workspaces and touchless amenity. 

Meanwhile, Aware Super, which recently merged with VicSuper, plans to consolidate from three locations across the city into one, taking up 8000 sq m at 555 Collins Street.

Cox Architecture designed the two-tower project along with global design practice Gensler, which Charter Hall tapped in 2019 given the firm's experiences designing workplaces for clients including Apple, Airbnb and Facebook.

“Our development and asset management teams have achieved leasing with major commitments from Amazon and Aware Super, whilst further leasing is well advanced,” Charter Hall office chief executive Carmel Hourigan said.

“This highlights 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.”

Last month Charter Hall acquired a half-interest in the $2-billion Southern Cross Towers complex in Melbourne from Canada’s Brookfield and US private equity and real estate house Blackstone.

The towers, which span a combined 126,000sq m of office space, were targeted to enhance the group’s exposure to modern assets with government tenants—currently occupied by the Victorian government with a weighted average lease expiry of six years.

Charter Hall’s CPOF portfolio has now grown beyond $9.5 billion in scale and represents the single largest office portfolio within the group’s $26 billion office platform. 

The group has remained focused on high-quality premium assets which are less likely to be affected by current market volatility. 

Greater risk surrounds secondary assets with shorter financing and lease terms in place.