This article is from the Australian Property Journal archive
Macquarie Office Trust has gazumped a number of listed property groups to secure one of the last remaining development sites within the ‘Paris End’ of Melbourne’s Collins Street.
MOF intend building a $180 million office tower on the much sought-after site.
In total, MOF paid $27.6 million to amalgamate the strategic site, which includes 171 Collins Street, formerly known as the Shops of Shops once owned by Sir Donald Trescowthick. In recent years, 171 Collins Street was tightly held by Marral Holdings, a private investment group controlled by Ralph Robinson. Robinson is currently overseas.
Other sites amalgamated into 171 Collins Street include 14 Watsons Place and 178-184 Flinders Lane.
Knight Frank leasing director Mark Rasmussen applauded Macquarie’s astuteness in acquiring the site, which is considered one of the few remaining prized Collin Street sites now available.
“Macquarie will deliver space into the Melbourne office market just when it is needed. It is probably the most astute acquisition for the past 15 years and is one of the few attainable development sites within Melbourne’s famed ‘Paris End’ of Collins Street,” Rasmussen told Australian Property Journal late yesterday.
In fact, the project will be the first major development in Collins Street for 15 years.
MOF’s chief executive Simon Jones told Australian Property Journal that MOF plan to develop a prime grade building totalling approximately 27,000 sqm, with a projected total return of between 15% and 20%.
He said this was higher than what would potentially be achieved through acquiring stabilized assets in the current market.
“The project reflects the trust’s strategy to seek development opportunities that can provide higher unitholder returns,” Jones said.
He said MOF’s development strategy reflected its ability to respond to prevailing market conditions.
“The competitiveness of the current market makes sourcing value enhancing acquisitions increasingly difficult. This high quality development opportunity will help us to deliver superior returns to investors,” he added.
Jones said the MOF’s office tower will boast proximity to international hotels, high end retail shopping and landmark office buildings.
Knight Frank’s Rasmussen added that the addition of 171 Collins Street comes at a time when Melbourne desperately needs prime Collins Street office space.
“This project could not have been better timed.”
Naturally, Jones agrees adding that Melbourne has experienced robust leasing demand in recent years, which has driven rental growth and capital appreciation, despite new supply entering the market.
“With few new developments currently planned for the core CBD and strong tenant demand expected to continue, the trust’s project is well placed to capitalise on favourable market conditions.”
MOF intends focusing on securing pre-commitments over the coming year.
“The development will enable the trust to work with tenants to deliver tailored workspace environments. The building will also employ market leading environmentally sustainable business practices,” Jones said.
The Collins Street acquisition follows MOF’s 2 Market Street project in Sydney’s CBD, which has recorded early success.
Building works started at 2 Market Street in November 2005 and MOF report that already around 30% of the building has been pre-committed.
Commenting on the trust’s future development aspirations, Jones said Macquarie Office would continue to evaluate development opportunities that deliver value to its investors.
He also confirmed that the management team’s strong development capabilities would continue to be enhanced, supporting future development plans.
“We are looking to redeploy capital from fully valued assets into higher value adding development opportunities to maximise unitholder returns.”
Late last week, Australand announced it was preparing to build a $180 million office tower on its Freshwater Place site.
By Ted McDonnell
