Charter Hall and Singapore sovereign wealth fund GIC are paying a speculated $2.1 billion – reflecting a bullish c4.5 per cent yield – for a half stake in Melbourne’s Southern Cross office complex.
Built on the site of the Southern Cross Hotel, where The Beatles famously stayed in 1964, the investment contains two A-grade commercial towers – one which is about to be majority vacated – and about 27 shops.
The asset was offered by Blackstone and Brookfield – initially as a 75pc stake then in its entirety.
Keppel REIT, Link REIT and Lendlease, in partnership with M&G Real Estate, are believed to have looked in.
The deal comes eight months since the National Pension Service of Korea paid Lendlease $1.2b for the 34 storey, 70,000 square metre, 699 Collins Street, Docklands – in what was the country’s biggest single office transaction of the year.
Three weeks ago we reported CBRE Investment Management sold 120 Spencer St, at the CBD/Docklands border, for $325m, twice what the asset traded for in 2016.
Southern Cross complex
Developed from 2004, the Southern Cross asset covers a 9558 sqm site bound by Bourke, Exhibition and Little Collins streets, and Southern Cross Lane.
Both major buildings go by the same address of 121 Exhibition St:
- SX1, which includes c76,900 sqm across 39 floors. Three state government departments – Justice and Regulation, Jobs Precincts & Regions, and the State Revenue Office, are the key occupiers, and
- SX2 – a 22 storey tower containing c45,200 sqm of lettable area tenanted to Australia Post and the Energy & Water Ombudsman.
Interestingly, Charter Hall last year snared Australia Post out of SX2 to a Burnley office due for completion in 2024 (story continues below).
The Southern Cross Hotel replaced the Eastern Market which was last built in 1879.
Charter Hall snaps up more of Melbourne’s CBD
The Southern Cross asset is expected to be held on behalf of GIC by the Charter Hall Prime Office Fund (CPOF), which would control 30 properties, many backed by government occupiers, worth a total of c$10.8b; this trust is also set to co-retain Australia Post’s upcoming Burnley base.
Elsewhere in the CBD, CPOF owns the multi-building Wesley Place development, which has been taking shape over the past couple of years.
It is also constructing a workplace at 555 Collins St, part of which will be occupied as Amazon’s headquarters.
Last year, with Hickory, Charter Hall acquired the Kilkenny Inn at the north east corner of Lonsdale and King streets with plans for a 22 floor office.
CBRE and Cushman & Wakefield marketed the Southern Cross property.
NB: this story was updated in July, 2022, to include the (50pc) interest speculated to be selling.
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