Deutsche Bank Place in Sydney

China Investment Corporation has spent almost $2.5 billion to buy Investa’s Australian office portfolio, in what is reportedly the largest transaction of privately held commercial property in Australian history.

CIC, one of the world’s largest sovereign wealth funds, has now cemented itself as a major player in Australia’s commercial office market, with a stake in nine buildings across Sydney, Melbourne and Brisbane, including a quarter stake in the premium-grade Deutsche Bank Place at 126 Phillip Street, Sydney and a half-stake in the premium-grade 120 Collins Street in Melbourne.

The deal, handled by UBS and Morgan Stanley, was struck on Monday evening.

According to Morgan Stanley Real Estate Investing, Investa Office will retain management of the portfolio.

“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,” it said in a statement.

According to the Australian Financial Review, the portfolio acquired by CIC has a strong initial yield of five per cent, which could lead to a re-rating of the office sector. The portfolio has a passing, fully let income of about $145 million.

Mirvac and LaSalle Investment Management are currently locked in negotiations regarding management rights of the broader Investa group.

The deal is subject to Foreign Investment Review Board approval.

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  1. There will be different views about whether high value real estate, be it in buildings or farms, should be owned by foreign governments (as distinct from foreign private owners). But one signal is very clear, and relevant: China values high value, high performance green(ish) buildings.

    Investa’s portfolio includes some of the top end buildings, with Green Star ratings. We know these buildings have been leading the market, raising expectations amongst tenants on operating costs and employee ambiance and productivity. China knows it too.

    It’s uber-relevant this week because the draft of NCC 2016 is in the news for all the wrong reasons – lowering stringency when the world – well, the rest of it, anyway – is raising the stakes.

    Good on Australia 2015 – heading in the wrong direction. Again. I remember when we used to lead the world…