This article is from the Australian Property Journal archive
MELBOURNE property investor Brendan Sullivan has bought Katherine Square on Flinders Lane from Rodney Smorgon for $16.35 million, on a passing yield of 6.2%.
Constructed in the 1980’s by Becton, the property comprises two strata-titled office buildings including 517-525 Flinders Lane – a four level, 5609 sqm building with ground floor retail and office use above – and 533-537 Flinders Lane – a smaller four level 1556 sqm building which also includes ground floor retail and offices above.
The buildings are 94% leased to 23 tenants at a current passing income of approximately $1.084 million per annum.
Sullivan is hoping to capitalise on the forecast undersupply of CBD office space in Melbourne. He has been successful in repositioning properties by acquiring undervalued Melbourne CBD offices, updating it, and increasing its tenant appeal.
According to marketing agents, Gross Waddell and Jones Lang La Salle, Sullivan trumped strong interest from local and interstate investors.
The agents said the current average passing rentals of $171 a sqm were well below current market levels, whilst the short-term lease expiry profile provided an outstanding rent reversion opportunity.
“This is a strategic acquisition designed to take advantage of what the research has indicated will be a severe shortage of office space in the Melbourne market in the short to medium term. That shortage is likely to put significant upward pressure on rents and property values.
“Now is the time to buy Melbourne office,” Sullivan said.
He added the location, just off Collins Street in the CBD’s western core, which has over recent years undergone significant improvement through the development of the Melbourne Docklands precinct together with the redevelopment of Southern Cross station, had also been an important consideration.
The property is surrounded by some of Melbourne’s most prominent buildings including the Rialto Towers, 530 Collins Street (the former Australian Stock Exchange), 15W (15 William St) and Media House.
Australian Property Journal
