Australia Post sells $348m stake in police HQ
Australia Post has sold out of a Melbourne skyscraper that will house the Victoria Police headquarters in a $347.8 million deal just as incoming chief executive Christine Holgate prepares to overhaul Post’s operations.
Australia Post sold its interest to Singapore-listed Keppel REIT, which will take a 50% stake in the premium office tower being developed at 311 Spencer St.
Australia Post will walk away with a net sum of about $140 million, which it will pour into modernising its network. “This transaction will free up valuable capital to invest in our people and in our services to the community,” a spokeswoman says.
Commercial Insights: Subscribe to receive the latest news and updates
Australia Post reported a bumper first-half profit of $131 million despite an 11% fall in letter volumes, and its full-year result will benefit from the sale.
Completion of the long-awaited deal comes after Holgate, the former head of Blackmores, was named the new Australia Post boss, on a lower salary than her predecessor, Ahmed Fahour.
The Australian revealed in March that an interest in the ultra-modern complex being developed by Australia Post and superannuation fund-backed Cbus Property would be sold.
The pair had proposed developing the now vacant site under the Andrews government’s market-led proposals process. The government quietly announced plans for the police headquarters in late December, comparing it with New York’s 1 Police Plaza.
Australia Post was working behind the scenes to exit as its mandate does not extend to owning skyscrapers and it could not pour money into the project. It called in fund manager Eureka-Real Assets to run an off-market process for its stake.
The deal is remarkable from a property perspective as the police pre-leased the entire building for 30 years, driving strong interest from international buyers at a time when the property cycle is at a high point.
“The new office tower at 311 Spencer St will provide unit holders sustainable income growth over the long term and a stable average yield of 6.4% per annum over the first 15 years from the lease commencement,” K-REIT chief executive Tan Swee Yiow says.
It is understood the initial metrics on the deal may have set a new benchmark price for Melbourne skyscrapers at an initial yield of less than 5%.
Cbus Property will also deliver the tower, effectively removing any risk for Australia Post. It also developed the adjacent City West Police Complex that opened in 2015.
Australia Post decided against selling the vacant block despite lucrative offers during the apartment boom. It has instead reaped the benefits of the more recent surge in Melbourne office values.
This article originally appeared on www.theaustralian.com.au/property.
