Hot Commercial Investment Deals in the Suburbs

Hot Commercial Investment Deals in the Suburbs

With increased uncertainties around CBD office towers performances, investors are beginning to see the value in suburban office buildings especially those that are partially vacant.

In Hawthorn, an inner suburb of Melbourne in the City of Boroondara, a five-level office owned by the National Institue of Integrative Medicine (NIIM) was sold at Christmas Eve to real estate fund manager Prime Value for $17.5 million on a 5.4 per cent yield.

Ed Wright, a selling agent from Knight Frank said that the 2341-square-meter building situated in the heart of the Inner East at 11-23 Burwood Road attracted 13 bids and significant interest from Victorian private and institutional investors, as well as from Sydney and Adelaide-based groups. He explained that it was a strong result especially with the three-year leaseback to NIIM, whose board of directors include former Swisse CEO and Ex-Financial Review Rich Lister Radek Sali.

“For assets priced between $15 to $20 million, there is heaps of money about trying to buy buildings”

It’s the second non-CBD Melbourne office building bought by Prime Value in the past 12 months.

In April, $62 million was paid for a St Kilda Road office building by the fund manager of Shakespeare Group through its commercial property arm.

In Rosebery, a locality in south western Sydney, another fund manager, Freehold Investment Management paid $29 million for a five-level office building at 55 Mentmore Avenue. The building sold with a weighted average lease expiry (WALE) of just one year and a 32 per cent vacancy rate. It was bought by¬† Mentmore Holdings, a company owned by the NSW farming McBride family, which paid $10.2 million for the building in 2013. JLL’s Mitch Noonan negotiated the deal. Freehold will look to reposition and refurbish the property in partnership with asset management firm Eagle Property Group.

The managing director of Freehold, Grant Atchison explained that while there was still value in premium CBD assets despite their expensive pricing, city fringe and suburban properties were benefiting as companies needed to have a way to be able to continue operating if there was a shutdown in the CBD, as the pandemic showed could easily happen. Also, he said there was already an established pre-COVID trend of corporates disaggregating their office needs by putting some components of their business, such as their back offices into the “Parramattas’ of the world”.

Lawrence Kopping, Eagle Property Group director said the Rosebery building was an attractive investment in part for its location within a significant urban renewal project, the $8-billion Green Square Town Centre where there was a densely populated workforce cluster.

In Alexandria, due west of Rosebery, investment group City Freeholds led by developer Michael Nuransky, paid $29.7 million for a two-level office building leased to ASX-listed retailer City Chic Collective at 151-163 Wyndham Street. The deal was struck on a yield of 4.3 per cent with about 12 months remaining on the City Chic lease. The building was advertised as a potential development play by Mercer Property’s Matt Davoren and Tom Speakman.

The vendor was property tycoon Terry Agnew’s Oxton. Records show he paid $24 million for the building in April 2019.

References

  • Suburbs now offer the hot go-to office investment

by Larry Schlesinger

https://www.afr.com/property/commercial/suburbs-now-offer-the-hot-go-to-office-investment-20210107-p56sbj

  • Flight Centre sells on St Kilda Road headquarters for $62.15m

by Michael Bleby

https://www.afr.com/property/commercial/flight-centre-sells-on-st-kilda-road-headquarters-for-62-5m-20200507-p54qv5

  • $50 million Great Keppel Island sale in doubt

by Larry Schlesinger

https://www.afr.com/property/commercial/50-million-great-keppel-island-sale-in-doubt-20191002-p52wz5