This article is from the Australian Property Journal archive
SINGAPORE-listed CapitaLand (CLI) is the latest investor to back the future of Melbourne’s CBD, buying the 120 Spencer Street office tower opposite Southern Cross station for over $320 million.
The deal follows reports of Charter Hall, with backing from Singaporean sovereign wealth fund GIC, agreeing to buy the dual tower Southern Cross complex on the city’s Bourke Street for $2.1 billion, on a yield of about 4.5%, and Singaporean fund manager HThree City nearing a $220 million acquisition of 330 Collins Street.
CapitaLand has acquired the 22-storey 120 Spencer Street on a circa 5% yield for its CapitaLand Open End Real Estate Fund (COREF), the fund’s first in Australia and fourth in the Asia Pacific, taking total investment to about $900 million since its establishment last August.
CapitaLand has spent $1.5 billion on five assets in Australia over the past six months, including 66 Goulburn Street in the Sydney CBD, and 101-103 Miller Street and Greenwood Plaza and 100 Arthur Street in North Sydney.
120 Spencer Street has a net lettable area of 32,000 sqm and is 97.5% occupied with tenants including major co-working space provider WeWork, Central Queensland University and Redhill Education. It has a weighted average lease expiry (WALE) of 6.7 years.
Vendor CBRE Investment Management has spent $30 million over the past years upgrading the tower. Since November, it has operated fully on green electricity and is contracted to do so for the next 10 years. It has also received the NABERS Energy 4-Star and NABERS Water 5.5-Star certifications.
CBRE Investment Management paid $250 million for the tower five years ago to Anton Capital, which had bought it for $165.2 million just a year earlier from Harry Stamoulis.
“In view of the post-COVID recovery and companies’ steady return to work, we believe that the Australian office market is showing signs of growth that will overcome the near-term challenges of vacancy and tenant incentive levels,” CapitaLand’s managing director for Australia, Paul Toussaint said.
“120 Spencer Street is well-positioned to capitalise on this given its strong WALE, vibrant location benefiting from the area’s rejuvenation, and potential for enhancements.”
Office occupancy in Melbourne, which has endured multiple lockdowns during the pandemic, is up to 48%, its highest reading since before COVID. The CBD headline vacancy rate tightened by 0.2% to 14.8% in the March quarter, according to JLL, with positive net absorption of 38,600 sqm over 12 months.
Simon Treacy, CEO of private equity real estate, real assets, CLI, said, “Leveraging CLI’s deep expertise and extensive network in the Asia Pacific, we continue to build up COREF’s portfolio with high-quality assets across gateway cities in Japan, Singapore and now Australia.
“The Australian office sector presents relative value, and our highly experienced local team has been able to capitalise on the window ahead of the post-COVID recovery to capture this opportunity.”
CapitaLand has a S$6.9 billion portfolio of assets under management in Australia comprising including office, business space, logistics and lodging assets across eight cities. CLI Australia currently manages 36 logistics properties and business parks, and two A-grade office buildings.
Singaporean capital invested $13.8 billion in Australian real estate over 2020-21, according to the latest data from the Foreign Investment Review Board, second only to the United States. Foreign players accounted for 40% of all transactions in the March quarter.