Melbourne investor makes 287pc return on property in three years after selling to Chinese buyer
A Melbourne investor has made an astounding 287 per cent gross capital gain in three years on a boutique commercial building in the city centre after selling to a mainland Chinese investor.
The art deco-style building known as Bourke House on the corner of Bourke and Russell streets sold for $33 million on a yield of about 4 per cent. It previously sold for $11.53 million in 2014.
Selling agents CBRE and Gross Waddell said the deal set a new Melbourne CBD land record of over $88,000 per square metre (for the 373-square-metre site) and would add further fuel to the current land tax debate.
Increased land tax bills
Investors in the Melbourne CBD and in other areas of high demand have been slapped with massive increases in their 2017 land tax bills following biennial municipal valuations last year. Values have surged due to the record prices paid by mainly overseas investors in the past two years for commercial assets.
According to CBRE Research, mainland Chinese investors accounted for 81 per cent of all the non-institutional grade assets sold in the Melbourne CBD since September. This followed a slump in investment earlier in 2016 due to tighter Chinese capital controls.
“There has definitely been an increase in appetite since Chinese New Year,” said Lewis Tong, who heads the CBRE Asian services desk.
“On a world scale investors still see Melbourne as being good value, especially when you can secure a prominent freehold corner on a famous street for about $30 million. In most other major cities this would only buy a strata title or secondary asset,” Mr Tong said.
Mr Tong marketed the C-grade building alongside CBRE colleagues Josh Rutman and Mark Wizel together with Gross Waddell’s Raoul Salter, Michael Gross and Jonathon McCormack.
“All key value metrics confirm that we are seeing some of the strongest conditions experienced in over 10 years, with both foreign and domestic buyers creating unprecedented pricing uplift for Melbourne commercial assets offered to the open market,” Mr Rutman said.
Bourke House was sold by Melbourne investor Unicorn Hotel Nominees Pty Ltd, owned by Carole Hart.
The building, which dates back to 1923, offers 1500 square metres of office space with retail space on the ground floor. It was previously owned by the Darrell Lea chocolate family.
The building is on the same block as the recently completed QT Melbourne hotel.
