Docklands portfolio set to smash sales records
Billionaire Lang Walker has put the $2.5 billion Collins Square retail and office project in Melbourne’s Docklands on the block in a move that could become Australia’s largest ever real estate sale.
Mr Walker’s company, Walker Corporation, has appointed investment bank UBS to handle the sale of the portfolio, which includes five office towers at the western edge of the Melbourne CBD.
Walker told The Australian that he had decided to sell Collins Square as he had been getting “two to three approaches per week” from interested parties.
AMP Capital, CIMB Capital Trust and M&G Real Estate are among the parties that are believed to have approached Mr Walker on the portfolio, although the companies could not be reached for comment.
“The whole nub of the decision to put Collins Square on the market was that we’ve been fielding offers from numerous people over the last six months. Obviously some of the overseas buyers have been approaching us,” Walker says.
“The company has a $23bn pipeline of other projects and we’re seeing this as an opportunity to redirect some energy and capital into some of those projects.”
Two of the five office towers at Collins Square are built and fully tenanted, with the remainder to be finished by 2017.
Tenants that have agreed to move to the precinct include Marsh Mercer, KPMG and the Commonwealth Bank.
If the project sells for its apparent value of $2.5 billion or higher, it would beat the record for a real estate sale achieved earlier this year.
In July, sovereign wealth fund China Investment Corporation paid $2.45 billion for a portfolio of office towers sold by Morgan Stanley’s Investa Property Group.
The company has a $23bn pipeline of other projects and we’re seeing this as an opportunity to redirect some energy and capital into some of those projects
The almost 5% yield secured for the Investa portfolio has enticed a host of property players to put assets on the market. Brookfield Property Partners is selling more than $2 billion worth of office and retail property, while Charter Hall Group and Valad Property Group are also selling portfolios.
Walker rejects assertions that the market has peaked.
“If you were to compare the 10-year bond rate with yields back in 2007 the spread … was a hell of a lot closer,” he says.
But he acknowledges that wave of international capital had pushed prices higher. Mr Walker said he had not considered selling other assets. The group had had leasing success at Collins Square, due partly to the large floor plates of between 2200sqm-2600sqm, Walker says.
“The value in that whole project from a tenant’s point of view — and from our point of view — is that it has created a very vibrant precinct and what we are seeing is it now unfolding and becoming very successful,” the developer says.
UBS Australasia head of real estate Tim Church says the Collins Square portfolio will be pursued by offshore and local investor groups.
“In a sustained low interest rate environment, assets such as Collins Square, Melbourne, which enjoy a long-dated lease expiry profile and attractive fixed annual rent increases from blue-chip tenants, will be highly sought after,” Church says.
This article originally appeared on www.theaustralian.com.au/property.