Dexus has exchanged contracts to sell a Sydney CBD office to Charter Hall’s prime office fund for $385 million, representing an initial passing yield of 5.1%.
The 17,928 sqm, A-grade office building at 383-395 Kent Street is located in the western corridor of the Sydney CBD.
The asset was fully occupied with a weighted average lease expiry of 3.2 years as of September 2021, with tenants including Wilson Parking, Grant Thornton Australia and InterSystems Australia.
Dexus Chief Investment Officer Ross Du Vernet said the deal was in line with their strategy of recycling out of some core properties and reinvesting into higher returning opportunities including their development pipeline.
The company said the sale price reflected a 1.3% premium to its last stated book value.
For the Charter Hall Prime Office fund, the acquisition offers a core Sydney CBD investment opportunity on a large approximately 3,600 sqm site.
“This strategic acquisition builds on CPOF’s portfolio of prime CBD assets, with multiple expansion and redevelopment options,” said CPOF Fund Manager Matthew Brown.
“This transaction supports our strategy to acquire high quality modern assets where we can successfully create major CBD precincts given its prime location.”
Charter Hall said the site was recognised as a tower cluster site under the latest planning controls, allowing for long-term development optionality and floorspace expansion potential of the existing buildings.
The newly-acquired property is also located adjacent to the fund’s 40,000 sqm office complex at 2 Market Street.
“Post completion of this acquisition, the CPOF portfolio will grow to $9 billion and will continue to cultivate its develop to core strategies, with current developments under construction or in planning phases within four major CBD markets, pre-committed to major customers such as Amazon, Australia Post and the Commonwealth Government’s Services Australia,” said Charter Hall Office CEO Carmel Hourigan.
The deal is expected to settle in July 2022.
Other recent office deals include Cromwell Property Group’s $184.7 million acquisition of a Brisbane CBD office from ISPT, and ISPT’s purchase of an office in Melbourne’s eastern suburbs from TE Capital Partners for $35.8 million.