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Property investment manager Charter Hall (ASX: CHC) has announced the acquisition of a 50 per cent stake in the Southern Cross two-tower complex in central Melbourne for an undisclosed fee from current joint owners Brookfield and Blackstone.
The Sydney-based real estate giant, which has a portfolio spanning 1,506 properties worth $61.3 billion, will take part-ownership of a combined 126,000sqm of high-quality office space through its subsidiary Charter Hall Prime Office Fund (CPOF).
Located at 111-121 Exhibition Street, the Southern Cross Towers occupy a prominent corner position with frontages to Exhibition, Little Collins and Bourke streets and provide access to transport, entertainment and sports precincts.
“The Southern Cross acquisition up-weights CPOF’s Melbourne CBD portfolio within the “Paris End”, enhancing our exposure to modern assets with government tenants, which have been two of the group’s strategic thematics that we continue to favour,” Charter Hall managing director and group CEO David Harrison said.
“We are pleased to advance our relationships with two existing tenant customers, the Victorian Government and Australia Post, as we grow our Melbourne office portfolio.
“The CPOF portfolio now comprises $9 billion of our $25 billion office platform, and we are proud of CPOF’s leading position, commanding the highest performance ranking in the MSCI wholesale office index over all time periods from one to ten years.”
Press speculation earlier this year suggested that Charter Hall would launch a joint bid alongside Singaporean sovereign wealth fund GIC to acquire the stake for more than $2 billion. However, after GIC walked away from the deal, Charter Hall went ahead with the purchase alone.
“This transaction demonstrates the quality of Southern Cross East and West and the strength in the Melbourne office market. Premium, well-positioned workplaces remain in high demand from tenants, retailers and investors alike,” Brookfield managing partner and head of Australian real estate Sophie Fallman said.
“Since developing the assets, Brookfield has added significant value to Southern Cross Towers, including the recent seven-year lease with the Victorian Government and upgrades to the East tower.
“We are pleased to now welcome Charter Hall to the precinct and pursue further enhancements, together.”
Current East Tower tenant, the Victorian Government, has six years remaining on the lease of the 37-storey building, which offers almost 80,000sqm of office space.
The 20-storey West Tower, which comprises 45,000sqm of net lettable area, is currently anchored by Australia Post until 2025. At that time, the company will move to a new Charter Hall development in inner-city Richmond.
The Southern Cross Towers have strong ESG credentials, including a minimum of 5-star NABERS (National Australian Built Environment Rating System) ratings on energy, water and green star ‘as-built’.
“The acquisition of Southern Cross Towers demonstrates the success of Charter Hall’s strategy — to expand our office footprint and offer best-in-class workplaces experiences,” Charter Hall Office CEO Carmel Hourigan said.
“With a site area of almost 9,000sqm, the scale of the Southern Cross precinct complements CPOF’s portfolio of other large-scale assets, including the Wesley precinct and 555 Collins Street in Melbourne CBD, together with Sydney’s iconic Chifley Square.
“We will work with Brookfield to re-lease the West Tower upon relocation of Australia Post in 2025 and look to further enhance the amenity offered by the complex.”
Shares in Charter Hall (ASX: CHC) have dropped by 1.44 per cent as of 10.48am AEST.
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