Cash-strapped Flight Centre to sell Melbourne office tower
Flight Centre is hoping to offload a St Kilda Road office tower for as much as $60 million as the coronavirus-hit travel agency looks to raise funds to meet its debt obligations.
Industry sources said the group has begun sounding out interest for 436 St Kilda Road, an 11-level glass building which it paid $31.3 million for in February 2008.
At the time, Brisbane-based Flight Centre acquired it as its Victorian headquarters. A refurbishment was undertaken in 2009.
The glass-encased building has 7524 square metres of lettable area and stands on a 2,317-square-metre site opposite Fawkner Park.
Current tenants include Flight Centre subsidiary Corporate Traveller, specialist travel agency Stage & Screen Travel and state soccer body Football Victoria. One floor is vacant and available for rent.
The offering of its major Melbourne commercial property asset comes as Flight Centre faces the toughest test in its 38-year history with the virtual grounding of international and domestic travel devastating its business.
On Thursday, Flight Centre said it was standing down 6000 employees – almost 30 per cent of its global workforce – as it prepares to close more than 500 outlets globally over the next few months.
As part of its Thursday statement, Flight Centre said it was also in the process of renegotiating rental agreements with landlords as it looks to significantly reduce occupancy costs.
“Discussions to date have been positive as Flight Centre has pursued potential costsavings including rent-free periods and more flexible trading hours,” said the group,
The Australian Financial Review‘s Street Talk column reported this week that based on Credit Suisse analysts’ estimates, Flight Centre needed $200 million to meet near-term funding requirements. Street Talk also reported that Flight Centre had hired Luminis Partners to help it canvas options for survival.
A spokesman for Flight Centre told the Financial Review: “We have flagged that we will pursue options to improve our liquidity and protect against a prolonged downturn.
“We will obviously consider asset sales as part of that overall strategy.”
Prior to the outbreak of the pandemic, St Kilda Road had been one of the country’s top performing fringe office markets in terms of values, rents and occupancy.
In December, Melbourne fund manager Vantage paid $58 million for a partially vacant building at 574 St Kilda Road, acquired from the Lederman family’s SHL Nominees.
The 10-level tower, which Vantage acquired on behalf of a pooled investment fund, is targeting a 6.1 per cent fully-let yield following a refurbishment of the 31-year-old building this year.
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