Cromwell Property Group snaps up Chesser House for $81m

4 April 2022

Cromwell Property Group has acquired one of Adelaide’s most high profile office towers for $81.35million following a significant repositioning.

Chesser House, located at 95 Grenfell Street in Adelaide, is an 11-storey A-grade office tower with total net lettable area of 11,121 sqm and a 6.1-year WALE.

The building has undergone significant works which includes the implementation of new end-of-trip facilities, a ground floor lobby upgrade, refurbished lift lobbies and modernised lift cars. A new 93KW solar panel system has also been installed, which generates 17% of the total base building power. This is reflected in the building’s 5-Star NABERS Energy rating.

The Chesser House acquisition strengthens the DPF portfolio and follows its acquisition of two Brisbane CBD assets – 545 Queen Street and 100 Creek Street – in May and October 2021, respectively.

The deal was negotiated by Knight Frank’s Guy Bennett and Colliers’ Paul Van Reesema and Alistair Mackie.

The property was snapped up prior to the commencement of a formal marketing campaign, on behalf of vendors Harmony Property Investments and Arc Equity Partners. It sold on a passing yield of 5.12% and a core capitalisation rate of 5.5%.

Cromwell’s Head of Retail Funds Management, Peta Tilse, commented, “Chesser House is a fantastic addition to DPF, anchored by the South Australian Attorney’s General Department and blue-chip tenants Serco and CyberCX.

“The Adelaide CBD is set to benefit from significant economic activity as a result of State and Federal Government spending on defence, technology, innovation and biomed. This is headlined by the Department of Defence’s $35 billion Future Frigate project and the $3.6 billion medical precinct, which is set to become the largest health cluster in the Southern Hemisphere.”

DPF currently pays unitholders equivalent to an annualised distribution yield of 5.4% via its exposure to nine high-quality assets across Queensland, New South Wales, Victoria and the Australian Capital Territory .

The Fund continues to be a highly attractive proposition for investors, with more than $50 million of gross inflows coming into the DPF over the past six months, off the back of a strong 12-month performance where the Fund produced total returns of 14.7%.

Ms Tilse added: “Cromwell is seeing very strong demand across its funds management business, with investors seeing Australia as a safe and attractive destination to invest their capital.

“Our retail funds business provides these investors with direct access to high-quality Australian assets, where they can benefit from Cromwell’s proven investment strategy which delivers both strong returns and a regular and reliable income, along with long-term capital growth potential.”

Strategically located in the heart of Adelaide’s core office precinct, Chesser House boasts prominent Grenfell Street frontage, and an enviable cash flow underpinned by coveted leases to the State and Commonwealth Governments together with national and global tenants including the Attorney-General’s Department, NDIS, Ombudsman SA, CyberCX, Serco and Gallagher.

“This repositioned A-grade tower is perfectly placed to capitalise on Adelaide and South Australia’s growing economy and the CBD office market, and presents a unique opportunity to activate Chesser Street,” Mr Bennett said.

“The ground floor of Chesser House was transformed in 2017, incorporating a new entry canopy and what is now one of Adelaide’s best lobby spaces featuring open plan meeting and working lounge areas.

“To date, $20million has been expended on both base building related works and various tenancy fit-outs at Chesser House, in addition to a further $10million flowing from the recent leasing incentives.”

Improvements have included the new lobby and lounge; new end of trip facilities for 37 bikes with opportunity for future expansion; a new entry canopy to Grenfell Street; modern, upgraded lift cars; and new fire services, BMS, air conditioning, and solar upgrades.

Chesser House provides direct linkages to major transport routes and connectivity to the rejuvenated Pirie Street and Adelaide’s premier retail precinct, Rundle Mall. Pirie Street and its surrounding laneways have become an activated food and beverage destination in the Adelaide CBD.

“Surrounded by the activation and significant refurbishment of older stock and new developments, Chesser House is at the heart of the resurgence of the Adelaide CBD,”

Mr Van Reesema said. “Nearby notable developments include the recently built Rundle Place and Bendigo Bank, as well as the upcoming 30,000sqm office building at 83 Pirie Street and the 40,000sqm mixed-used development at 60 King William Street.

“Both projects are largely pre-committed to State and Commonwealth Government occupiers, continuing the support of strong occupancy and high underlying capital growth into the future.”