An offshore buyer has begun due diligence on an office tower on Little Collins Street in Melbourne’s CBD in a deal worth close to $160 million, giving a confidence boost to the city’s battered commercial market.
Held by Credit Suisse Asset Management, the 11-level tower at 505 Little Collins sits on an island site. Its 18,000sq m of office space is 91 per cent occupied. Credit Suisse’s property arm put the property up for sale two months ago after receiving approaches, including interest from a Hong Kong buyer.
The mooted deal is thought to have been struck with a yield in the mid-5 per cent range, a relatively firm level for an institutional-style asset in a market which is only just emerging from a long and onerous lockdown.
JLL’s Leigh Melbourne and colleague Nick Rathgeber along with CBRE’s Kiran Pillai, Scott McGlone and Mark Coster were appointed to broker the Little Collins Street building.
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The city’s second lockdown, which began progressively easing in late October, had prevented inspections of commercial properties, adding a further obstacle to deals amid the wider uncertainty.
As a result, transactions have dramatically dwindled over the course of the year. The Little Collins Street offering followed the off-market sale to a Singaporean buyer of a Queen Street tower for $145 million in July.
That transaction was struck on an initial yield of 4.8 per cent, considered to be a relatively tight yield for a B-grade building in a market where leasing risk has increased in the wake of the virus crisis.
In September, Dexus sold a 22-level A-grade tower in the Melbourne CBD to German investor Deka Immobilien in a deal worth more than $450 million.
Credit Suisse’s property arm has shown itself willing to embrace opportunity during the disruption as well, teaming with local fund manager Vantage Property to acquire the struggling St Collins Lane mall for around $125 million, on a steep discount.
Last week, a Singaporean buyer put its foot on a four-storey heritage-listed building at the Paris end of Collins Street, the home of luxury retailer Louis Vuitton. That deal, at around the $65 million mark, was struck on a very sharp 2 per cent yield, sources said.
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