This article is from the Australian Property Journal archive
FOLLOWING preliminary discussions with prospective buyers, the Australian Unity Office Fund is seeking superior offers and has decided to field interest from other players for its last remaining asset, an office building in the St Kilda Road precinct, which has been independently valued at $62 million.
Located on a 2,318sqm Commercial 1 zoned site at 468 St Kilda Road, sitting just 2km south of the CBD and 800m from the future ANZAC Station, the 14-storey building includes ground floor retail, 13 floors of office and two basement cap parking levels.
The office boasts 11,210sqm of total net lettable area that is currently 75% occupied, which has potential to return an annual net income in excess of $5 million when fully leased.
John Marasco, Matthew Stagg, Anna Cavar from Colliers, alongside Trent Preece and Ben Schubert from Knight Frank, are managing the sale via an international expressions of interest campaign.
“This property not only offers a unique investment opportunity with its strategic location and secure income stream but also holds substantial potential for future development with its 65-metre height control,” said Stagg, head of investment at Colliers Victoria.
The property was built in 1985 and has been under institutional ownership ever since, having undergone periodic updates including sustainability initiatives to achieve a 4.0-star NABERS Energy rating and 4.5-star NABERS Water rating.
“St Kilda Road is a prominent commercial, residential, and biomedical precinct with approximately 632,000sqm of office space, which makes it one of Melbourne’s largest office markets outside the CBD,” said Cavar, capital markets director at Colliers.
“The precinct’s limited new supply over the past decades and significant stock withdrawals have created a scarcity of high-quality office spaces near the upcoming ANZAC Station, which will improve connectivity to northern and southeastern suburbs.”
The commercial building’s placement in the Northern Precinct of St Kilda Road means tenants and owners alike would benefit from significant amenity nearby, including green spaces in Fawkner and Albert Park.
This in addition to its proximity to public transport, with trams and the future ANZAC Station due to open in 2025.
The property is the last remaining asset owned by AOF, which has been progressively selling its investments. The fund had been in preliminary discussions with potential buyers and said it would explore other options if the offers were not superior.
Earlier this month the fund sold an office building at 64 Northbourne Avenue in the nation’s capital, and prior to that it sold a refurbished vacant Parramatta office tower and adjacent car park for $80.5 million – nearly $70 million less than what the asset was valued at just two-and-a-half years ago – just a few months after it pitched plans for a 68-storey build-to-rent tower on the expansive CBD site.
Other AOF asset sales have included 94-96 York Street in Beenleigh for $29.7 million, below what AOF paid in 2021 when it bought the then-new building for $33.52 million, and 150 Charlotte Street in Brisbane for $64.5 million. That price came in above the book value of $60 million, but represented a hefty capital loss for AOF, which paid $105.75 million in 2017 when it acquired the Brisbane CBD office building.
Shareholders are expected to be paid out proceeds from a wind-up via a trust.
The fund had come close several times in recent years to being sold.
Meanwhile the listing comes as the latest MSCI Capital Trends Report, shows the gap between buyer and seller expectations widening further in Melbourne’s office market.
While major office transactions across the market have included Mitsui Fudosan, which acquired a 66% stake in the office development of 55 Pitt Street for $1.3b in the largest deal of the year so far, 50% stake in 255 George Street in Sydney for $364 million, , 5 Martin Place in Sydney to Cbus Property for $296 million, 24% discount to the peak value,
Additionally, Mirvac has recently divested the 40 Miller Street, North Sydney office building to Barings for $140 million, and 367 Collins Street in Melbourne for $345 million, both at a 20% discount to peak book values, while Quintessential acquired 240 Queen Street at a 17% discount to peak valuation.
The international expressions of interest campaign for 468 St Kilda Road is scheduled to close on 25 September 2024.
