China Sovereign Wealth Fund Breaks Record for Office Property Deal

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Tuesday, July 28th, 2015
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One of the world’s largest sovereign wealth funds has acquired a nine-tower portfolio of office assets for a staggering $2.45 billion sum, in what is believed to be the largest direct property transaction in Australian history.

An office deal clinched by sovereign wealth fund China Investment Corporation (CIC) has broken the record for the largest direct real estate transaction in the history of the Australian property market.

CIC’s sealed its acquisition of the portfolio of nine office towers owned by Invest Property Group with a peremptory bid of more than $2.45 billion – the largest ever made on Australian shores as part of a direct real estate deal.

The colossal sum placed on offer by CIC enabled it to overcome the intense competition brought by close-run rivals DEXUS Property Group and the Abu Dhabi Investment Authority.

CIC is one of world’s largest sovereign wealth funds, managing as much as USD$220 billion in overseas assets on behalf of the Chinese central authorities in Beijing.

The portfolio of office properties acquired by CIC from Investa reportedly has a strong initial yield of 5 per cent and a fully let income of roughly $145 million, features which could have a strong impact on ratings in the Australian office sector.

The slew of office properties encompasses stakes in leading sites situated in the CBD’s of Australia’s two most populous cities, including 120 Collins Street in Melbourne and 126 Phillip Street in in Sydney.

Under the deal Investa Office will continue to fulfil a management role with respect to the assets recently acquired by CIC.

“As part of its acquisition of IPT, CIC International will enter into an investment management agreement with Investa Office (“IOMH”), thereby ensuring continuity of management services for the portfolio,” said Morgan Stanley Real Estate Investing, who is responsible for handling the transaction alongside UBS.

The deal is part of the ongoing sale of the Investa Property Group assets under the aegis of UBS and Morgan Stanley. The $9 billion in assets up for sale makes it the largest sell-side property transaction in the world thus far this year.

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