Morgan Stanley Real Estate Investing (MSREI) is investing in a Sydney office tower, creating a wholesale trust with Australia’s listed Charter Hall Group to purchase the AUD525m (€337m) asset.
The trust announced its first purchase of the Sydney office tower from Brookfield Properties Partners.
This acquisition is Morgan Stanley’s biggest capital commitment to Australia, following its exit from the Investa Property Group last year through a AUD2.45bn sale to China Investment Corporation.
MSREI and Charter Hall will jointly own and control the trust.
Brookfield, which built and owned the tower, is selling a number of assets as part of its strategic divestment to raise money for its AUD1bn Wynyard Place development in George Street.
IPE Real Estate understands the transaction was undertaken by MSREI’s newly minted Asia Core Fund, managed from Singapore.
Morgan Stanley declined to comment.
However, industry sources told IPE Real Estate the fund received commitments for at least $500m (€446m) from investors in a first round of raising.
Paul Keogh, who joined Morgan Stanley last year from AustralianSuper, the country’s largest super fund, manages the MSREI Asia Core Fund.
Charter Hall handles assets totalling AUD17bn, of which office buildings account for AUD8bn.
David Harrison, managing director and chief executive at Charter Hall, told IPE Real Estate the trust was a 50/50, single-asset vehicle that not preclude the partners from rolling out other trusts in future.
“I know the fund manager well and that [MSREI] is keen to grow its presence in Australia, and so there may well be other transactions,” he said.
He said capital had flowed – and would continue to flow – into high-quality defensive real estate.
“Core office remains attractive to both local and international investors due to the current spread between Australian property income yields and bond yields,” he said.
Harrison added that the current investment environment would continue to drive strong investment in “quality Australian commercial property assets”.
The office component of the building is fully let to the Macquarie Group, with the parking facilities leased to operator Secure Parking.
The asset is secured with a weighted average lease expiry of seven and a half years and provides an attractive investment proposition for both Charter Hall and Morgan Stanley.
Craig Newman, fund manager for Charter Hall‘s Core Plus Office Fund (CPOF), said: “The acquisition of 1 Shelley Street secures for CPOF a strategic property in Sydney’s fastest-growing office precinct.”
He said the addition of the asset would improve the weighted average lease expiry and the average building age of the CPOF portfolio.
One Shelley Street, which has an indexed annual 4% rental increase, has also improved the average rental growth profile for the fund, Newman said.