Three Super-Prime, Central Car Park Investments Offer Ultra Rare Opportunity

Posted on 15th October 2020

480 Collins Carpark 29

Three super-prime Melbourne CBD and St Kilda Road car park investments have come to the market, offering an ultra-rare chance to purchase assets within a prized sector that is expected to be particularly strong post-COVID.

Fitzroys agents Paul Burns and Chris James are marketing the three assets, located in the heart of the St Kilda Road precinct and in the Melbourne CBD. The three lots are being offered for sale by EOI “in one line or separately”.

Together, the fully leased portfolio comprises 677 bays and 64 storage units with a 5.37-year weighted average lease expiry, and a total net income of more than $2.045 million per annum. The assets include:

1 Queens Road, comprises six levels of car parks with 523 bays (650 when stacked), plus 61 storage units within the 14-level office and residential building, St Kilda Rd Towers.

452 St Kilda Road, comprises three levels of car parking with 80 bays, plus three storage units, within a 21-level hotel and serviced apartments building.

480 Collins Street, offering a generational chance to secure the only car park in the Melbourne CBD that has direct access from Collins Street. The asset comprises two levels of car parking with 74 bays (110 when stacked), within a 20-level office and hotel building located in the new centre of Collins Street.

Each asset is being offered with a long-term lease in place. The tenant has operated a profitable car parking business in each premises over many years.

“COVID-19 has had an impact on the local, national and international property markets. Secure cash flow is more important than ever,” Burns said.

“Commercial car park investments are likely to be particularly strong post-COVID. Employees will inevitably prefer driving to work as opposed to using public transport, and employers will secure parking bays to accommodate this preference.”

Burns said the fundamentals underpinning the commercial car park sector were sound and backed by policy at Council and State Government levels.

“Over many years, there has been a trend towards new buildings including minimal car parks. This, together with the ongoing removal of on-street parking for bike lanes and tram super stops, development of new office and residential projects on car parking sites, and the fact that public transport has not been unable to keep pace with increasing demand from population growth makes the demand outlook for existing car parks very bright.

“The tenants in these assets have committed to not seek any rent relief as a consequence of the COVID-19 situation, guaranteeing the purchaser a 100% return on their investment, without interruption. The secure lease agreements offer no vacancy risk for almost six years, and, if or when a lease expires, there are negligible re-leasing costs.”

The impending completion of the nearby Anzac Metro tunnel station in the St Kilda Road Precinct is likely to be the catalyst for a wave of new higher-density residential and office developments in the area. Burns said it is most likely many of the proposed new developments will be under-parked, as has been the trend for some time now, in both the St Kilda Road and CBD markets.

“After holding the assets for many years, the vendor has recognised the purchaser demand that exists for securely-leased investments where cash flow is assured,” Burns said.

James said interest is expected from domestic and offshore investors seeking an ultra-rare chance for investment portfolio diversification into the sought-after asset class, which is offering exceptional capital growth prospects.

“Very few investment-grade car parks have changed hands nationwide in the past three years,” he noted.

“Meanwhile, Australia continues to be internationally recognised as an investment safe haven, and due to their scarcity, prime CBD and CBD fringe locations are far more likely to withstand any market correction.”

Burns said the properties will show an attractive yield relative to alternative, quality investments which have achieved yields of 4% to 4.5% in the COVID-19 environment.

He said investors are showing a preference for easy-to-manage assets that require little capex, little or no re-leasing and lease incentives, and have guaranteed rental increases.