This article is from the Australian Property Journal archive
FUNDS management firm AVARI Capital Partners has picked up the second component of a West Melbourne parcel to sell in a week, paying $38.5 million for the former Sands and McDougall building that it will refurbish and lease as offices.
The converted warehouse at 355 Spencer St was part of a block of three properties offered by developer Frank Palazzo, Resimax Group director Ozzie Kheir, and Probuild founder Phil Mehrten earlier this year.
Approval for a 23 level hotel and office project was secured last year for the combined site, on the corner of Spencer St and Jeffcott St, but the owners opted to offer the properties for sale individually or in one line. A buyer for the entire parcel could not be found.
Last week, the old warehouse site at 102-108 Jeffcott St sold to a developer for $9.5 million with plans to build a high density apartment project. The last of the three properties, at 371 Spencer St, is now for private sale with an asking price of $10 million.
That would net the vendors a total of about $58 million from the sell-down, five years after buying the portfolio for $38.8 million. That included 355 Spencer St for $27.2 million.
AVARI founder and chief investment officer, Alan Liao said the acquisition of the six level, 7,363 sqm converted manufactory was in line with the firm’s strategic focus on value-add real estate investment.
“355 Spencer St represents a structurally sound, superbly designed and aesthetically pleasing building. To knock it down and re-develop would not achieve its best and highest use,” he said.
“We will run an extensive refurbishment program including an internal spec fit-out, service upgrades and add end-of trip facilities. We will also activate the central courtyard with a cafe or small bar to provide tenants with an attractive communal space.
“We believe this unique proposition will attract strong leasing interest and will ultimately improve the value of a magnificent building.”
Printing and publishing firm Sands and McDougall was best known for its annual Directory of Melbourne publication that ran from 1862 to 1974. The building was more recently used as offices and sits on a prominent 2,000 sqm corner site with more than 90 metres frontage.
CBRE’s Mark Wizel, who managed the sale with Josh Rutman, Scott Orchard and Scott Hawthorne, said the vendors had “presented some very attractive assets to an obviously hungry market”.
He said that if the strong pricing “provides any indication of what is to come then we may see a much more positive market in the near term than anyone would have dared forecast”.
“There is no doubt that enquiry and transaction volumes for commercial properties have declined as a result of covid-19, but some of the activity and successfully completed deals we have seen over the past month indicate that astute buyers continue to look for opportunities in what is arguably the most uncertain times we have seen since the second world war,” Wizel said.
Planning permits obtained comprised around 30,000 sqm of buildable area, providing for partial demolition of the low rise Jeffcott St warehouse and development of the 23 storey hotel and conversion of two brick warehouses on Spencer St into office space.
