Australian Unity pulls trigger on $81.47m Herston sale

The property at 15 Butterfield St in Brisbane last traded in 2009 for just under $70 million.

A government-occupied premium grade commercial building in Herston, on the outskirts of the Brisbane CBD,  has finally settled for $81.47 million two months after the deal was reported.

The sale highlights the continuing attraction of well tenanted assets with a secure weighted average lease expiry.

Located at 15 Butterfield St in Herston, opposite the Royal Brisbane Hospital, the property comprises 11,075sqm of net lettable space over four levels.

The sale comes two months after it was reported the building, which is backed by a secure lease to the Queensland Government Department of Health for just under five years, was changing hands.

CBRE’s Mike Walsh says the property’s strategic location in “arguably the most prime asset available next to the Royal Brisbane Hospital” and the fact the asset’s cashflow is underpinned by the Department of Health were pivotal to the sale of the building to Australian Unity.

“This building’s attractive tenancy profile and immediate proximity to the Royal Brisbane Hospital bolstered its investment appeal to Australian Unity, given the asset has been purchased in their Healthcare Fund,” Walsh says.

“Australian Unity has formed a view that the tenant will remain in the property beyond the initial term, given the asset’s position directly opposite the hospital and natural advantages this location provides.”

“Additionally, there are some other synergies associated with this deal relevant to Australian Unity’s mandate, which justified its final position.”

The Herston office building last traded in 2009 for just under $70 million.

The Herston office building last traded in 2009 for just under $70 million.

“The scale of this landmark transaction reinforces the unabated strength of capital markets and highlights the premiums being paid for prime investment stock in a market lacking these types of opportunities.”

The sale follows publication of a research and forecast report on the Brisbane metro office market by Colliers International, which says investors are continuing to seek out buildings with strong tenants and secure WALEs.

Colliers recently sold the 14,286sqm ATO-tenanted Commonwealth Government Building, at 28 Macgregor St at Mount Gravatt, south of Brisbane for $57.1 million on an initial yield of 8.23%.

“The campaign was swamped by enquiry, reflecting the covenant of the tenant and the five year WALE,” Colliers report says.

Colliers says high levels of amenity, accessibility to public transport and access to – but not necessarily a location within – the CBD are driving both investor and occupier appetite within the Brisbane office market.

Colliers adds that the inner south and urban renewal markets accounted for the majority of sale and lease transactions in the first half of the financial year.

“Nine of the 15 lease deals of over 1000sqm recorded in the (first) half occurred in these markets. Further optimism is drawn by noting that four of these transactions of over 1000sqm occurred in December 2015.”

The urban renewal area relates to urban areas within 5km of the CBD. The property at 15 Butterfield St, Herston, sits just outside of this boundary but is bolstered by its location directly opposite Royal Brisbane Hospital.