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Brothels are not risky business for all

October 31, 2016

The Hoppers Crossing brothel in suburban Melbourne. Photo: Supplied

As an asset class brothels don’t tend to get a lot of attention, but it turns out that the buildings housing the world’s oldest profession might still be a good investment.

Despite the collapse of the company that ran Australia’s best known bordello, Melbourne’s Daily Planet, and the news last week that its premises were being sold, agents say there is still money in owning brothels in the right locations.

Sutherland Farrely’s Grant Sutherland, listing agent for a brothel in Hoppers Crossing, a south-western suburb of Melbourne, currently tenanted to Whisper’s Playground, said that the niche nature of brothels meant they tended to offer a higher return than other assets.

The brothel, on an 807-square-metre block and with six rooms, is being quoted with a sale price of $1 million-plus, and is currently generating $130,000 a year in rent, with 3 per cent annual rent increases.

“We’ve had brothels in the past, and they tend to attract a decent amount of interest. You get a good return on investment – you get a higher return because it’s a specialised asset,” Mr Sutherland said.

The Hoppers Crossing brothel is a mortgagee in possession sale, leased to the current occupant for five years from November.

In Sydney the sale of a building in prestigious Rushcutters Bay housing brothel/escort service Michelle’s is already stirring a lot of interest.

In a booming property market the eastern-suburbs site, listed with CBRE, has development potential, with scope to build up to 16 units.

But listing agents Gemma Isgro, Michael Khouri and Nicholas Heaton said it was too soon to tell whether the property would be snapped up by a developer, as the property was currently generating rental income of about $343,000 a year.

Outside 133-135 Bayswater Road, Rushcutters Bay. Photo: Supplied The home of Michelle’s brothel, at 133-135 Bayswater Road. Photo: Supplied

“It’s hard to tell whether it’ll go to a developer or someone who land banks it and takes the rent, the tenants pay really good rent,” Mr Khouri said.

The 364-square-metre building, at 133-135 Bayswater Road, Rushcutters Bay, currently houses a nail salon and hairdressers on the ground floor, with Michelle’s operating across both the ground floor and upstairs.

The businesses are currently on a seven-year lease with 12 months written notice required before demolition.

133-135 Bayswater Road - home of 'Michelle's' brothel - occupies a prime position in the popular Rushcutters Bay. Photo: Supplied The building occupies a prime position in popular Rushcutters Bay. Photo: Supplied

The property has received a high level of inquiry after going on sale last week, with Mr Heaton saying that zoning approval for brothel operations is a rare find.

“To get a DA for that use is incredibly difficult, there are all sorts of criteria you have to address. You have to make sure it’s not close to schools, has rear lane access,” Mr Heaton said.

“To get planning approval is very hard. It could sell to a long-term investor or to an owner operator.”

In the outback mining town of Mount Isa, Queensland, agent John Tully, of City and Country Realty, is selling the town’s only (legal) brothel.

Business appears to be a bit more fickle there – the nature of the mining industry means that client demand in Mt Isa fluctuates.

The end of the mining boom dealt a blow to the brothel’s trade, Mr Tully said.

While the growing popularity of dating apps meant itinerant workers had less reason to visit.

But signs of a pickup in the commodity boom have got Mr Tully speculating that a new owner may benefit from a new wave of demand from the fly-in, fly-out workforce.

The brothel, with eight rooms, is fully set up but unoccupied, which meant the new owner either needed to find a licensed tenant or operate on an owner-occupier basis.

Otherwise the complex would have other uses.

“It could be offices or you could gut it and turn it into an industrial space,” Mr Tully said.

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