Charter Hall is continuing a national spending spree – outlaying $331.3 million for a suburban Sydney office majority leased to the New South Wales Department of Transport.
The Glasshouse, or Building C of the Macquarie Square business park (artist’s impression, below), is due for completion next March.
Charter Hall’s Long WALE REIT will control a 50 per cent in the property at 45-61 Waterloo Road: it is set to launch an equity raising campaign seeking investors to the fund (which will control 15 per cent of the 242 Exhibition Street office in the Melbourne CBD which we reported was being acquired in May).
The Charter Hall Direct PFA Fund will own the balance of The Glasshouse.
Macquarie Square is being developed by China backed construction company John Holland on a three hectare block it acquired for $90 million in 2017.
Upon completion, the master planned campus-style workplace (artist’s impression, below) will contain about 117,017 sqm of office space within five buildings.
All will overlook a 7000 sqm public park.
Often promoted as Sydney’s second-largest CBD, Macquarie Park is about 15 kilometres north of the city – and a two minute walk to the John Holland built Sydney Metro Macquarie Park train station.
This Metro North West line connects Sydney’s western suburbs to Macquarie Park through to Chatswood.
In 2024, this infrastructure is set to be extended to the city.
John Holland executive general manager Development and Investments, Tom Roche, said “with more than 80 per cent of the Glasshouse leased…this is clearly a market that will continue to grow”.
The Glasshouse building
The Glasshouse building contains 34,099 sqm of lettable A-grade office area over eight levels, as well as 848 sqm retail space, end of trip facilities and 350 car parks.
The NSW government has pre-committed to 73 per cent of it on a 12 year lease, with options.
At the building completion date, if any part of the office is still vacant, vendor John Holland will provide a three year rental guarantee which requires minimum five year lease terms to be secured.
On those terms – this is, for Charter Hall, a fully occupied investment with a 9.4 year weighted average lease expiry (WALE).
It is acquiring the asset on an approximate 5 per cent yield.
Charter Hall Direct chief executive officer Steven Bennett added “the opportunity to invest in The Glasshouse is consistent with the PFA’s strategy of acquiring assets with a long WALE, leased to strong government and corporate tenant covenants.”
“The Fund is benefiting from strong investor equity inflows as investors are attracted to the quality of the office portfolio, the Fund’s distribution yield of 7 per cent and the monthly distributions paid to investors.
“Large prime assets like The Glasshouse are of the highest quality and often are only within the reach of large institutional investors,” the executive added. “As a result of the access to deal flow from the Charter Hall Group, we are able to offer retail, HNW and SMSF investors exposure to institutional quality assets by partnering with other Charter Hall funds”.
Charter Hall a landlord to the government…again
Charter Hall has been establishing a stronger relationship with the federal government, and state governments over recent years.
Late last month we reported the group secured Australian Federal Police as the sole-occupier of a 20-storey office set for construction at 140 Lonsdale Street in the Melbourne CBD (artist’s impression, right).
A year ago today, we reported it acquired industrial investments tenanted to the AFP.
In June we reported it spent $102.5 million on a bus depot rented to the Queensland state government.
In Melbourne, it controls assets also leased to the Victorian government.
Charter Hall Office chief executive officer Adrian Taylor said “the investment extends Charter Hall’s strong relationship with the NSW government as a major tenant customer of our office portfolio.”
“We have a strong track record of partnering with government tenant customers and ensuring we deliver quality workplace solutions over the long term,” Mr Taylor added.
The Charter Hall Direct PFA fund now includes 15 offices worth about $1.2 billion. The offices are 99 per cent occupied providing a WALE of 7.9 years.