Martin Place 'money box' to be redeveloped

It is the second big deal for the bank's Commonwealth Property Office Fund (CPA) in the past two weeks, after it sold down its stake in the 259 George Street site for $395 million to the private group, Metrocorp.

The fund will use the cash from all the deals to retire debt and buy other "core" assets that may become available.

The site, on which the former Commonwealth Bank's famous tin money boxes were modelled, is to be redeveloped, which CPA and Cbus will jointly finance. The estimated cost is more than $405 million.

At the end of the project, nine floors will have been added to the side of the heritage building, that runs down Martin Place and around the corner in Pitt Street. It was one of the first properties built in the CBD.

Cbus has also agreed to take on the option - for no upfront cost - of a 50 per cent stake in the fund's asset, 8 Exhibition Street, Melbourne. That building is valued at between $280 million and $300 million and Cbus will pay market value when a deal is completed.

Macquarie Equities' property analysts said the combined sales will help reduce CPA's gearing to about 16 per cent, which is very low against its peers.

"CPA has previously noted it is considering a range of capital management initiatives, including special distribution or acquisition opportunities," Macquarie Equities' analysts said.

Under the deal, CPA and Cbus will jointly assume leasing and development risk for the duration of the project. Part of that will be to have at least 30 per cent of the property committed for lease before the redevelopment begins in earnest.

The sale is part of the Commonwealth Bank's decision to consolidate, and then relocate, all its Sydney city-based staff into the new properties at Darling Harbour, known as Commonwealth Bank Place.