Charter Hall Group and partners acquire Telstra’s HQ for AU$830mn

Australian property company Charter Hall Group has announced the formation of a partnership to acquire Telstra’s Melbourne HQ for AU$830mn (US$1.18bn).

The Global HQ, located at 242 Exhibition Street at the “Paris end” of Melbourne’s CBD, consists of a 47 storey office tower with an area of 65,913 sqm featuring office accommodation, retail and car parking.

Charter Hall Group Managing Director and CEO, David Harrison said: “This off-market transaction which settles in the 1H FY20, reflects the deep relationships we have across our platform with both investor and tenant customers, with capacity to fund major transactions in the Australian market. We have a strong track record of creating institutional quality investment opportunities that deliver long term sustainable income for our investors.

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“The Melbourne CBD recorded 153,650 sqm of net demand in the year to 31 March 2019 – double that of Sydney CBD (71,800 sqm) - and was the strongest of any Australian CBD office market.1 Continued strong tenant demand has placed downward pressure on the Melbourne CBD vacancy rate, which now stands at 3.7% the lowest level since 1989.”

Partnering with Canada’s Public Sector Pension Investment Board and its own $5.4 billion Charter Hall Prime Office Fund (CPOF), the partnership will take ownership of the building and lease it to current tenants Telstra.

Telstra’s lease expires in financial year 2032 with subsequent options for renewal and annual fixed rental reviews of 3.5%. 

CPOF Fund Manager, Matthew Brown said: “Given the favourable Melbourne CBD office outlook this acquisition provides the Fund with a unique opportunity to further enhance the quality of its existing office portfolio whilst strengthening the quality of the Fund’s cash flow given the long WALE nature of the lease to a high-quality tenant covenant in Telstra.”