This article is from the Australian Property Journal archive
DEXUS Property Group has snapped up 40 Market St in Melbourne's CBD for $46.7 million — below the current valuation price of $48.2 million and original asking price of $50 million.
Dexus has bought the building from the 40 Market Street Trust which is managed by Entrust Funds Management.
The property had been on and off the market since 2009, when it was marketed for $52 million. It was put up for sale again in July this year with an asking price of approximately $50 million.
Dexus CEO Darren Steinberg said the property has strong repositioning potential and significant rental reversion, as well as provide a cost effective way of accessing a high quality property, where the cost of acquisition plus refurbishment is below replacement cost.
The nine-level B-grade office building comprises 12,011 sqm of space including 11,711 sqm of office and 300 sqm of ground floor retail space, plus 85 car spaces and is a 0 star NABERS Energy Rating property.
The building is fully leased to Powercor Australia, Victoria’s largest electricity distributor, until December 2018 – returning $4,144,207 p.a. as at 1 October 2012 with annual increases of 3.75%.
“This purchase offers an opportunity for us to demonstrate our property expertise in driving enhanced performance, and is further evidence of the execution on our objective of being the leading owner and manager of office property in Australia.
“40 Market Street provides an opportunity for Dexus to reposition the property through refurbishment, improving the property’s NABERS Energy rating and extending the lease term with the existing tenant. This, combined with an acquisition yield of 8.9%, is forecast to deliver an internal rate of return1 of greater than 13%, in excess of our hurdle returns.
“This property complements the acquisition of 50 Carrington St Sydney. The refurbishment works involved to reposition the property will form part of our overall 15% maximum development exposure and will add value to the property. The acquisition will be funded from existing debt facilities and is immediately accretive to earnings,” Steinberg said.
Settlement is expected to occur on December 20.
Property Review
