This article is from the Australian Property Journal archive
MELBOURNE fund manager Forza Capital has capitalised on strong demand by selling a South Carlton office building for $37.05 million after acquiring it only four years ago for $20.6 million.
Forza which is led by Adam Murchie and Ashley Wain has sold 15-31 Pelham St South Carlton, with the sale price representing a yield of 6.04% and a rate per sqm of $6,000 sqm. This is an 80% increase in property value.
The sale was handled by Fitzroys Paul Burns and Alasdair MacGillivray of Bayley Stuart Real Estate.
The four-level 6,178 sqm office building and basement car park for 160 vehicles is located only 600 metres from the north eastern fringe of the Melbourne CBD grid. It is fully leased to a range of health and government sectors tenants including Vic Health, Breast Screen Victoria, Novotech and Warner Brothers. The passing net income is approximately $2.24 million per annum with a WALE of 4.27 years.
“The property was purchased by the Forza Pelham Street Fund in 2012 and has enjoyed 100% occupancy ever since. The $9,300,000 of equity from a syndicate of High net Worth Investors has enjoyed a compounding IRR of 24% per annum and a total investment return of 136% over 4.5 years, which is an outstanding return in this low interest environment,” Forza Capital director Ashley Wain said.
Director Adam Murchie said in 2012 the purchase yield was 8.5% at a time when bank interest rates were about 5%, delivering a spread of about 3.5%.
“Interest rates have fallen to around 3.75% and the property yield has tightened to 6%, reducing that spread to 2.25%. We felt with these metrics, it was an opportune time to sell,” he added.
Fitzroys’ Paul Burns said the property was keenly sought by both private investors and fund manager/syndication groups (bids were received from 15 buyers), and it was ultimately sold to a Melbourne based private investor.
“Carlton and the immediate North Eastern CBD fringe is one of the tightest and most securely held pockets of Melbourne. When space does come available, major Educational Institutes like Melbourne University and RMIT compete with a number of Healthcare groups who need to be in this location. Considering the ‘cap’ on supply which is a consequence of the historic nature of the area, and the competing forces which residential developers bring to the market – there is not much left for traditional office users.” Burns said.
Australian Property Journal
