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Charter Hall Group (Charter Hall or the Group) announced that its $3.6 billion Charter Hall Office Trust (CHOT) has exchanged contracts to divest 65 Berry Street, North Sydney for $212 million, which is a 10 per cent premium to the 30 June 2020 independent valuation. The property was sold on a passing initial yield of 5.21 per cent.
65 Berry Street is a modern A-grade office building built in 1986, comprising ~14,500sqm across 17 upper levels of office accommodation and parking for 262 vehicles (1:55sqm). The building is located adjacent to the future Metro Station in North Sydney. The asset was extensively refurbished in early 2019 as part of WPP’s lease renewal and expansion over 9,700sqm (or ~70 per cent of NLA). WPP’s lease expires in June 2023 without an option. The building’s occupancy is currently 98.6 per cent with a 2.2-year weighted average lease expiry.
65 Berry Street was initially acquired by an ASX listed office REIT in 2001 for $74.5 million and CHOT acquired the asset as part of the privatisation of the Charter Hall Office REIT in April 2012. The investment has generated an annualised equity total return of circa 21.5 per cent per annum for CHOT’s investors since 2012.
CHOT Fund Manager, Mr Trent James, said “We were approached by the purchaser, a private group, off-market and given CHOT’s focus on major CBD markets, we chose to divest.”
Charter Hall Office CEO, Ms Carmel Hourigan, said “Its pleasing to see a high volume of office sales printing at premiums to 30 June valuations, vindicating our view that asset pricing will be resilient. The sale of a short WALE asset like 65 Berry Street further reflects the strength in the market for office assets. In an environment of low interest rates, real estate will continue to be an asset class that is well supported into 2021 particularly as our tenant customer office utilisation rates improve nationally.”
Josh Cullen, Mark Hansen and Steve Kearney of Cushman & Wakefield introduced the deal to Charter Hall.