This article is from the Australian Property Journal archive
THE Melbourne office market has taken a trip Back to the Future in a DeLorean with the recent sale of a prominent St Kilda Road office building for around 50% below its peak value, fetching a price almost identical to 17 years ago, effectively wiping out nearly two decades of capital growth.
The Australian Unity Office Fund (AOF) has sold its last remaining major property, 468 St Kilda Road in Melbourne, to Bayley Stuart Capital for $41.75 million excluding disposal costs, at a discount of over 30% below the independent valuation of $62 million.
The sale price is almost 50% below the peak valuation of $83.20 million in 2022 and it is only $3.05 million shy of the transaction price of $38.7 million set 17 years ago.
AOF said it will return proceeds to unitholders from this sale as well as the disposal of 2-10 Valentine Avenue, Parramatta with settlement currently expected to occur in March 2025 and 150 Charlotte Street, Brisbane, which has an expected in April 2025 settlement date, before delisting from the ASX.
If the proposal is approved, the trust will return aggregate proceeds to unitholders of between $1.20 to $1.23 per unit.
The windup of the ASX-listed fund comes as office assets continue to sell below book values, with the sector never truly returning to its pre-COVID glory.
In Melbourne, the office market is currently on track for its lowest annual level of sales in 20 years, with around $900 million in sales transacted this year so far. While a recent MSCI Capital Trends Report revealed the gap between buyer and seller expectations is widening in Melbourne’s office market.
Though in other markets, there are signs that the price gap may be narrowing with $800 million worth of offices trading hands recently.
This week US investment giant BGO bought 10-20 Bond Street in Sydney for $580 million and Aware Super acquired 145 Ann Street in Brisbane from Dexus for $200 million.
They followed Singapore-listed companies UOL Group and Singapore Land Group (SingLand) acquisition of Brookfield’s half-stake in 388 George Street for $460 million on a yield of 6.2%. And German investment powerhouse Real I.S. Group snapped up 8 Windmill Street, Millers Point for $47.75 million from Melbourne-based property investment manager Marks Henderson.
Dexus is also looking to diversify its interest beyond the office sector, teaming up with Marquette Properties to repurpose a B-grade office tower in Brisbane’s CBD into a $500 million purpose-built student accommodation facility (PBSA) with 1,200 beds. While also looking at selling off $100 million Melbourne office assets.
This comes after a string off office sells well below their previous book value, including AOF’s the sale of a relatively brand new office building in Brisbane’s south, for $29.7 million, after paying $33.52 million for the office in 2021. Quintessential completed its $250 million acquisition of the 240 Queen Street at a 17% discount to its peak valuation.
While Cbus Property is acquiring a 50% share of 5 Martin Place in the Sydney CBD for $310 million, which had previously shown a valuation of $405 million two years ago. With Mirvac selling its 40 Miller Street North Sydney office building to Barings for $140 million and 367 Collins Street for $345 million, at a 20% discount to peak book values and Swiss fund AFIAA its 628 Bourke Street for $115.8 million to Bayley Stuart, far below the $185 million it paid M&G Real Estate seven years ago.
