Martin Place 'money box' to be redeveloped

COMMONWEALTH BANK'S famous "money box" building at 120 Pitt Street/5 Martin Place has partially changed hands, with the industry superannuation fund Cbus buying a half share for $42.3 million.

By InvestSMART · 5 Aug 2011

By InvestSMART ·
5 Aug 2011

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COMMONWEALTH BANK'S famous "money box" building at 120 Pitt Street/5 Martin Place has partially changed hands, with the industry superannuation fund Cbus buying a half share for $42.3 million.

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.

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Frequently Asked Questions about this Article…

What happened to the Commonwealth Bank “money box” building at 120 Pitt Street / 5 Martin Place?

The heritage “money box” building was partially sold: industry super fund Cbus bought a 50% share for $42.3 million. The building is set for a major redevelopment jointly financed by Commonwealth Property Office Fund (CPA) and Cbus, with the project estimated to cost more than $405 million.

Who bought the half share in the Martin Place money box building and how much did they pay?

Cbus, an industry superannuation fund, bought a half share in the 120 Pitt Street / 5 Martin Place property for $42.3 million.

What are the redevelopment plans for the Martin Place property and how many floors will be added?

The redevelopment will add nine floors to the side of the heritage building that runs down Martin Place and around the corner into Pitt Street. CPA and Cbus will jointly finance the works, which are estimated to cost more than $405 million.

How will CPA and Cbus share financing and development risk for the project?

Under the deal CPA and Cbus will jointly assume leasing and development risk for the duration of the redevelopment. Part of the arrangement requires at least 30% of the property to be committed for lease before major redevelopment work begins.

What is Cbus’s option on 8 Exhibition Street in Melbourne and what does it mean?

Cbus has agreed to take on an option (with no upfront cost) to buy a 50% stake in CPA’s 8 Exhibition Street asset. That building is valued at between $280 million and $300 million, and Cbus will pay market value when the option is exercised and the deal is completed.

Why is CPA selling parts of its portfolio and what will it do with the proceeds?

CPA plans to use the cash from these sales to retire debt and to buy other “core” assets that may become available. The partial sales are part of the fund’s capital-management approach following Commonwealth Bank’s consolidation of its Sydney staff into new Darling Harbour offices.

How will these sales affect CPA’s gearing and financial position?

Macquarie Equities’ property analysts said the combined sales should reduce CPA’s gearing to about 16%, which they described as very low compared with CPA’s peers.

What capital-management moves might CPA consider next after these sales?

According to Macquarie Equities’ analysts, CPA has previously indicated it is considering a range of capital-management initiatives, which could include a special distribution or further acquisition opportunities.