This article is from the Australian Property Journal archive
SHAKESPEARE Property Group has swiftly swooped on Flight Centre’s Melbourne headquarters, netting $62.15 million for the travel group which put the St Kilda Rd office building up for sale to free up capital due to the covid-19 pandemic.
Flight Centre put the property on the market less than a month ago, after announcing it would permanently close 428 Australian retail stores, and this week the group backflipped on charging customers cancellation fees, which is estimated will cost the company $80 million.
The 436 St Kilda Rd office building has been acquired by the property arm of boutique investment manager Prime Value Asset Management, in a deal negotiated by Fitzroys director Paul Burns.
Flight Centre has committed to leaseback 75% of the space, they have occupied the building since the property in 2008.
Burns said numerous parties made offers to buy the asset, and ultimately, the deal was negotiated in an abbreviated timeframe and subject to a very short due diligence.
He added that the sale shows local and offshore investors continue to demonstrate confidence in Melbourne’s St Kilda Road, attracted to the high-performing office market’s strong fundamentals and its prospects beyond the current environment.
Burns said that whilst in some areas of the market COVID-19 has brought on a “wait and see” approach amongst buyers, securely-leased investments remain highly sought after as cashed-up investors are more motivated to set themselves in bricks and mortar with income.
“Buyers taking a long-term view beyond the COVID-19 environment recognise St Kilda Rd’s fundamentals have it well-placed to maintain its strong performance of recent years,”
The 11-storey building has a net lettable area of 7,506 sqm and is on a 2,317 sqm site opposite Fawkner Park. Five tenants occupy the fully-leased building, including Flight Centre and state governing body Football Victoria.
Burns said investors and developers have been favouring office use along St Kilda Rd after a period in which multiple properties were converted to residential, as tenants are seeking accessible city fringe locations with quality lifestyle amenity in greater numbers.
“Investors have been actively pursuing St Kilda Road buildings with value-add and repositioning potential, looking to take advantage of Melburnians’ increasing preference to live, work and play across the inner city.
“My understanding is that SPG see this as an opportunity to buy a strategically located office property, in this case located a short distance from the future Anzac Metro station that will further enhance accessibility to St Kilda Rd.
“The dearth of investment opportunities in this precinct encouraged the buyer to act quickly, and they will now set about adding value to the property and deliver strong returns to their investors,” he continued.
Burnes said in a market with a shortage of available quality stock, pent-up demand means a number of buyers are ready to pounce when opportunities arise, as evidenced by this quick sale in less than a month.
“The depth of buyer interest from domestic and offshore parties, and the feedback received during the campaign demonstrated Melbourne has retained its safe-haven investment status, even throughout the uncertain climate.” Burns concluded.
