Charter Hall swoops as Singaporeans exit in $140m Collins St deal
In a sign of the times, property powerhouse Charter Hall has taken over a prime Collins Street site for an office development in a $140 million deal after its Singaporean owner struggled to win buyers for its proposed residential project.
Standing on a corner of King Street, 555 Collins Street is a handy barometer for the state of the market, where the sentiment has swung against investor-style high-rise apartments.
For Charter Hall’s Prime Office Fund which has acquired the site, it is a double-whammy deal because the listed fund also owns a neighbouring site at 55 King Street.
Combined, the two sites encompass 4620 square metres, creating major development accumulation towards the western end of the Melbourne CBD’s most prestigious street, opposite the landmark Rialto Towers and a block from the Southern Cross station.
An amalgamated site of that size could potentially host a 70,000-square-metre commercial tower, worth $1 billion or more in the current market
“Given the favourable Melbourne CBD office outlook as evidenced by record site sale prices such as 60 Collins Street and 150 Queen Street, we pursued this rare Collins Street corner site off market with the additional attraction of it adjoining our 55 King St property,” fund manager Matthew Brown said.
“The acquisition is consistent with CPOF’s investment strategy of acquiring sites in tightly held markets to expand the “develop to core” part of the investment strategy.”
The sale was negotiated by Knight Frank’s Paul Henley and Scott Newton.
The Charter Hall-run fund’s move at 555 Collins Street follows a similar strategy it has taken at the other end of the city, where it has put together a super-site at the northern end of Lonsdale Street. The one-hectare site surrounding a historic church – dubbed Charter Hall’s “holy hectare” – includes a $700 million office development, Wesley Place, which is well under way.
A second, $200 million office tower on the Lonsdale Street street agglomeration has also been approved.
Not so fragrant
While fresh opportunity beckons for Charter Hall, for Singapore’s Fragrance the exit from Collins Street has been a long time in the making.
The listed developer, controlled by property tycoon Koh Wee Meng, had sold just just 46 per cent of a residential tower approved at 555 Collins Street, more than a year after it launched the project. The site is currently occupied by a dilapidated 24-storey office building slated for demolition, to be replaced by a 625-unit residential tower.
Approval for that project had come after Fragrance scaled back its original plan for the prominent site after buying it from developer and Financial Rich Lister Harry Stamoulis for $78 million in 2014.
Under Mr Stamoulis, ambitions for a office skyscraper on the site had soared to 404 metres after controversial changes to planning rules under the previous Coalition government. Fragrance submitted plans for a 302-metre apartment, office and hotel complex just before a Labor government came into office in late 2014.
As the new government and planning minister Richard Wynne tightened the planning system in the central city, Fragrance then decided to sell its Collins Street site.
But there were no buyers for it two years ago and Fragrance changed tack again, winning approval for a smaller, residential-only development that it began marketing in the middle of last year.
Calls to Fragrance from The Australian Financial Review went unanswered on Monday.
Nearby on Bourke Street, the Singaporean developer is pursuing a 78-storey residential tower, whose unusual and distinctly curved design was inspired by US pop singer Beyonce. Around 200 apartments are yet to find buyers in that project, with a rump of unsold stock persisting since Fragrance first went to market three years ago.
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