Buyers pounce on $1.8b Collins Street precinct

Buyers pounce on $1.8b Collins Street precinct

1 March 2019

Local and international property groups are sharpening their pencils for a first round bid on a $1.8 billion office, hotel, and retail precinct at the top of Melbourne’s Collins Street, controlled by funds giant QIC, reports the AFR.

Aspiring investors have less than a week left to submit first-round bids on QIC’s commercial precinct at 80 Collins Street—the so-called “Paris end” of the prestigious street.

The offering includes an existing tower and a mixed-use project rising around it, representing as much as $1.8 billion in developed real estate.

Local players Charter Hall, AMP Capital, and Dexus have all been weighing the opportunity as are powerful foreign buyers thought to include private equity giant Blackstone, which has invested in the Southern Cross towers next door.

The precinct comprises an existing 52-storey tower, leased to a diverse group of private and state government tenants, a 39-storey office tower, now more than halfway leased, along with a 300-room hotel to be operated by NEXT, and a retail complex of around 5,800 square metres, says The Urban Developer.

“80 Collins will be a destination that honours Melbourne’s thriving culture and commerce and is situated at the centre of a globally recognised precinct with a distinct local identity,” QIC managing director Steve Leigh said.

The tower, which overlooks the Royal Botanic Gardens, has been designed to achieve a 5-star NABERS energy rating and a 6-star Green Star office design rating.

Although the project is still under construction, the tower is already more than half full with leasing pre-commitments.

These include blue-chip tenants such as investment bank Macquarie, who has taken a reported 6 000 square metres of the leasable 43,000 square metre space.

Recent leasing deals include DLA Piper taking 4,500 square metres, McKinsey committing to 2,700 square metres, and law firm Ashurst close to signing up for 4,500 square metres.

QIC has also snared celebrated restaurateur Chris Lucas, in combination with Sydney’s Martin Benn and Vicki Wild, to open an upmarket eatery in the precinct.

Depending on position in the tower, space is commanding rents from between around $750 to around $850. The cost has risen as much as 10 per cent in the last year, notes the AFR.

Held on one title, the sheer size of the opportunity may encourage bidders to form clubs for the February 28 first round deadline.

In a separate deal this week, and the first institutional deal struck in Melbourne this year, the GPT Wholesale Office Fund (GWOF) exercised its pre-emptive right to buy the stake in the 2 Southbank Boulevard office tower from Frasers’ Australian subsidiary for $342 million.