A modern A-Grade office investment with exceptional income security is set to hit the tightly held Melbourne CBD market.
Colliers International’s Leigh Melbourne and Nick Rathgeber, in conjunction with CBRE’s Mark Coster, Kiran Pillai and Luke Etherington, have been appointed to sell an 18-storey, 11,600sqm office building at 460 Lonsdale Street on behalf of REST.
“Since acquiring 460 Lonsdale Street in 2002, REST has invested significantly in refurbishing a number of the office floors along with the ground floor lobby, café tenancy and end of trip facilities,” Mr Melbourne said. “In excess of $5 million has been spent in the past six years to further enhance 460 Lonsdale Street and its already strong tenant appeal.”
460 Lonsdale Street features a WALE of 4.6 years, underpinned by leases to the Victorian and Commonwealth Governments and to Barristers Chambers Ltd, who recently committed to a new 10 year lease. Sitting above eight levels of car parking, the office floors enjoy outstanding natural light and protected view corridors across the CBD and beyond.
“The opportunity to purchase well leased, well located, modern office investments in one of Australia’s most popular CBD markets remains rare,” Mr Melbourne said. “ Prime assets in Melbourne remain tightly held and seldom trade on market. 460 Lonsdale Street represents one of very few modern A-Grade properties in the traditional CBD grid under $100 million and available to purchase on the open market.
“Melbourne is currently one of the best performing office markets in Australia, and the lease expiry profile of 460 Lonsdale Street means that the purchaser benefits from secure income in the short to medium term, but can capitalise on the stronger leasing market conditions forecast from 2017 and beyond.”
49% of the asset’s income is secured by Commonwealth and Victorian State Government lease covenants. The low risk income on offer at 460 Lonsdale Street is further diversified by a significant commercial car park component, leased to Secure Parking.
“Strategically located in the legal and commercial heart of Melbourne’s CBD, the property is centrally positioned between Docklands and the eastern end of the CBD and appeals to a broad occupier market,” Mr Coster said. “Tenants benefit from immediate proximity to Melbourne’s law courts, in addition to excellent access to public transport and a wide range of dining and retail options.
“ 460 Lonsdale Street is positioned at the edge of the western core and is centrally located to provide convenient access to Docklands and the wider Melbourne CBD grid.”
Following numerous offerings in the first half of 2015, 460 Lonsdale Street is the only one of a few institutional grade office building currently for sale on-market. 575 Bourke Street, 114 William Street and 222 Exhibition Street were all hotly contested and there are no further on-market offerings anticipated in the immediate future.
“ Investor appetite for core real estate has continued throughout 2014 into 2015,” Mr Coster said. “Melbourne and Sydney remain the most popular investment markets in Australia, particularly Melbourne given its notability as one of Australia’s gateway cities, diverse tenancy base and lower leasing risk.
“ Approximately 33% of purchases above $20m in the CBD in the year ending March 2015 were undertaken by foreign investors and developers, predominantly from Asia. With interest rates anticipated to remain low over the year ahead, combined with attractive yields in an international context, demand from foreign developers and investors is expected to remain a feature in 2015.”