Charter Hall and Morgan Stanley Real Estate Investing have jointly bought the distinctive Macquarie office tower at One Shelley Street, Darling Harbour, Sydney for $525 million from the Canadian Brookfield Office Property.
It follows the creation of a second Automotive trust by Charter Hall, which combined, has boosted the group's funds under management to $17 billion.
The Macquarie Bank building, dubbed the millionaire's factory, at One Shelley Street, with its honeycomb-like exterior, was developed and built by Brookfield in 2009, was one of the first office properties in the King Street Wharf precinct and also one of the first in the city to achieve a 6 Star Green Star rating.
Macquarie Bank also used it to showcase what was then its first open plan-style, activity-based working environments and has a lease of 7.5 years.
Brookfield will use the funds raise to help finance its $1 billion development at Wynyard in George Street. The asset was sold through CBRE and Savills.
Ownership of the 11-storey asset will be through a newly created wholesale trust run by the $2.6 billion Charter Hall Office Fund (CPOF) and backed by Morgan Stanley's real estate business.
Charter Hall's CPOF fund manager, Craig Newman, said One Shelley Street will give the fund a "strategic property in Sydney's fastest growing office precinct" , while improving its average rental growth profile, and comes with annual 4 per cent rental increase clauses.
It follows the creation of the second Charter Hall Direct Automotive fund which is looking to raise $48 million with an initial distribution of 7.25 per cent. The fund will own car dealerships leased to Automotive Holdings across the country.
Charter Hall's chief executive David Harrison said the expansion of the funds under management comes as the office sector is attractive to both local and international investors due to the current spread between Australian property income yields and bond yields.
"This investment environment will continue to drive strong investment in quality Australian commercial property assets," Mr Harrison said.
Demand is high for quality office assets as investors seek out higher returns with stable rent rolls.
That is evidenced by Australian Unity, which plans to list the Australian Unity Office Property Fund on the Australian Securities Exchange, following a vote by existing unit holders on June 17.
The $391 million fund is unlisted. It was established in 2005 and owns a portfolio of eight office assets in NSW, Victoria, the Australian Capital Territory, South Australia and Queensland. The plan is to raise up to $155 million of equity from new and existing unit holders through an underwritten float as well as provide a capped $56.2 million withdrawal offer to existing unit holders.
Mark Pratt, general manager of Australian Unity Real Estate Investment, said the market has responded positively to both the proposal and the "prospect of Australian Unity's commercial property capability in a listed environment".
"This is the first Australian real estate investment trust expected to list on the ASX this calendar year and we have been pleased with the high level of interest from investors to date," he said.
