$100m of Capital Pursuing Melbourne Commercial Property
Despite an uncertain environment, $100 million of capital is actively pursuing well-located, income-producing Melbourne commercial property assets, demonstrated by the Fitzroys sales of a blue-chip investment on Burke Road, Camberwell for a remarkable $12.06 million, and a high-profile Mulgrave office building for $6.6 million.
Chris James and David Bourke of Fitzroys sold the long-term home of the Commonwealth Bank at 735-737 Burke Road (corner Commerce Lane) on behalf of private vendors that had held the property for 23 years. The purchaser is a private local investor.
Located in the prime of the famous shopping strip and just metres from bustling Camberwell Junction, the dominant 844sqm 2-level building is on a corner site of 490sqm and has a large 15.7-metre frontage to Burke Road.
The sale price reflected a very sharp 3.5% yield. Commonwealth Bank has a new, long 7+5+5-year lease, returning $425,000pa net.
James said confidence is growing that there is a substantial amount of capital active in the market for good commercial assets.
“Investors from around Australia and offshore continue to actively source and compete fiercely for well-located and income-producing Melbourne commercial property assets, even in the uncertain environment,” James said.
Both campaigns were highly competitive. Burke Road generated 8 offers, meaning there are 7 underbidders out there with well over $70 million to deploy into the market, while the 372 Wellington Road, Mulgrave campaign saw 4 underbidders put forward strong offers.
“These campaigns alone have demonstrated there is a combined $100 million of capital actively pursuing Melbourne commercial property assets,” James said.
Bourke said the Burke Road property’s underlying fundamentals presented a set-and-forget cornerstone asset.
“The property’s secure lease to a premium tenant in the Commonwealth Bank was a major drawcard for investors, with the attractive return offering a premium to having money sitting in the bank in the historically low interest rate environment, and a safer proposition than putting money into a volatile share market,” he said.
“Offshore investors’ showed an added interest due to the attractive exchange rate resulting from the lower Australian dollar, as well as Melbourne’s worldwide reputation as an investment safe haven.
“Investors are recognising that Melbourne commercial properties present a compelling investment proposition, and that now is an ideal time to acquire a strong income-producing asset.”
James noted that marketing of the asset had to be converted from an Auction campaign to Expressions of Interest.
“There has been some talk of commercial sales coming to a halt, particularly as auctions have been put on hold, but this campaign witnessed remarkable depth in the bidding, and demonstrated buyers will still chase properties with strong underlying fundamentals.
He said that the sale price for both properties showed firmer yields than expected.
“Whilst the COVID-19 issues were building during the sale campaigns, it may well be that the return and security of major and well-leased commercial assets will see an appreciation in values.”
Bourke said the inner-east has further solidified its status as one of Melbourne’s most highly-regarded locations for investors around Australia and overseas.
“The Burke Road retail and lifestyle strip services an affluent and established catchment that is one of the most prized in Melbourne, the high-profile Camberwell Junction precinct is the shopping and lifestyle heartbeat of Melbourne’s inner-east.
Fitzroys has now sold $16.34 million of commercial properties along Burke Road, Camberwell recently, including the sale of the dual-fronted freehold at 628 Burke Road, for $4.28 million.
James, Bourke and Fitzroys colleague Shawn Luo negotiated the sale of the Mulgrave office building via Expressions of Interest, on behalf of a private owner who had held the property for more than 10 years. The deal was struck within 24 to 48 hours after the close of the competitive campaign.
Zoned Special Use Zone - Schedule 6 under the Monash Planning Scheme, the high-profile, 2-level office building of 1,675sqm is on a substantial corner site of 4,742sqm with a combined frontage of 129m to Wellington Road and Enterprise Court, and has 70 on-site parking spaces.
ASX-listed and government tenants within the building include Ambulance Victoria and IMCD Australia Ltd, for an estimated net income of around $479,600pa.
Luo said the new owner intends to hold the property long-term as a passive investment, and perhaps undertake repositioning works in the future to capitalise further on its strong return profile.
Disclosure: The weekly Fitzroys Property Wrap is for information only on transactions in the Melbourne property market. Fitzroys provides this information as a public service. We are not purporting that all sales and leases within this report were transacted by Fitzroys. Terms/Privacy © Copyright 2020 Fitzroys.