Melbourne’s Largest Office Tower in 25 Years Purchased for $462M
- Mar 07, 2013
Melbourne, Australia—Real estate investment trust Investa Office Fund (IOF) has announced the acquisition the of a premium office project in Melbourne in partnership with Investa Commercial Property Fund. The partnership, which is paying around $462 million for the property dubbed 567 Collins Street, will have an equal ownership share of 50 percent each. The land itself will cost approximately $38 million. Payment is scheduled to take place in mid-March.
“We are delighted to be adding this asset to our portfolio—premium grade assets seldom trade, and we have been able to secure this asset on an accretive basis at an attractive cash-on-cash yield. The acquisition allows us to increase our weighting to Melbourne without taking on leasing risk until at least 2019, whilst participating in an improving market over the medium term,”IOF Fund Manager Toby Phelps said in a news release.
The purchasing partnership will fund construction through progress payments during development. In return it will receive from the developer interest and line fees of 6.75 percent per year of total project cost until June 2014, when it will increase to 7 percent. The property is expected to generate a cash-on-cash yield of 6.7 percent upon completion, scheduled for mid-2015. This will translate into an annual $15.5 million for IOF before interest expense.
567 Collins Street is being developed by a joint venture consisting of APN Property Group and Leighton Properties. The project broke ground in late January 2013 on a 42,431-square-foot tract of land at the western end of Collins Street in one of the most sought-after business addresses in Australia and at the gateway to Docklands and Melbourne’s central business district. The 26-story tower is said to be the largest premium-grade high rise constructed in Melbourne in the past 25 years and will occupy a frontage in excess of 240 feet on Collins Street.
The high rise with its 592,000 square feet of net leasable area will feature seven floors of podium campus office space and 16 levels of upper tower office, with the uppermost floor dubbed the Melbourne Room. Amenities will include a two-story fitness center, a two-three level foyer, which will comprise a lobby, as well as retail and café space and plentiful open space.
Sustainability will be an inherent part of the project, which will implement state-of-the-art technology to improve indoor air quality and efficiency and minimize water consumption. Sustainable transport initiatives will be promoted at 567 Collins Street, which is in close proximity to all forms of public transport. The project is registered with the Green Building Council of Australia and will target a Six Star Green Star Office Design v2 Rating. It will also have five-star NABERS (National Australian Built Environment Rating System) Energy and Water ratings.
The joint venture of Cox Architects and Spowers is acting as lead architect on the project.
Even though in its early stages of construction the high-rise has tenant pre-commitments for 47 percent of its net leasable area. Among its tenant roster are Corrs Chambers Westgarth with a lease contract just short of 95,000 square feet and Leighton Contractors, which will be consolidating its presence at the location by bringing in some 600 employees from five different location to a recently-signed lease of over 136,700 square feet in the property’s campus component.