Lang walks: $400m Fortitude Valley office tower dumped

Walker Corporation’s proposed building at 801 Ann St, Brisbane.

Tycoon Lang Walker has dumped plans to build a $400 million office tower in Brisbane’s Fortitude Valley, offloading the site to fund manager EG for $27.72 million.

The tycoon last January won approval for a 26-storey commercial tower on the property at 801 Ann St, after scrapping plans for twin towers housing 433 apartments.

The asset was acquired for EG’s Yield Plus Infrastructure No. 2 fund, which was launched in 2016 with a $750 million real estate mandate, but developing the tower would be a step up for the firm.

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Walker Corporation had previously been given the green light to build the high-rise unit blocks at the Ann St property, but changed the approval in response to Brisbane’s oversupply of apartments.

The planned office tower was to span 44,000sqm of net lettable area and have large flexible floor plates of about 2000sqm. Walker held talks with a range of major companies seeking A-grade office space in the area.

Located near trendy James St and Fortitude Valley Railway Station, the green five-star-rated building was to be completed in 2020.

EG’s has a diversified strategy across various asset classes including office, residential, retail. They are most recently known for the repositioning play at the Flour Mill of Summer Hill and the $33.3 million acquisition of a three-hectare site in Glen Waverley.

But its timing may still be good as government departments are also chasing space and the city’s leasing market has tightened.

The property, which is currently fully leased, is just 1km north-east of the Brisbane CBD and is on a 3582sqm island site. It is also 150m from the James St retail and dining precinct.

The property comprises a showroom, car service centre and offices, which have a weighted average lease expiry of five years, and they spin off a net yield of 4.7%.

The deal was brokered by Seb Turnbull of JLL.

“This property is well located in proximity to the high-quality James Street precinct,” says EG associate director capital transactions, Sean Fleming. “The wider Fortitude Valley area continues to gentrify and will benefit from major infrastructure expenditure, including the arrival of the $5.4 billion Cross River Rail.”

EG notes that the property has existing applications for both the apartment scheme and the commercial plans.

“The high-quality functional improvements and location of the island site allow a number of opportunities to enhance the value of the asset over the long term,” Fleming says.

The Ann St site is the EG fund’s eighth asset and it has now acquired about $330 million worth of property across Australia. Its strategy is to acquire yield-producing real estate with repositioning potential, near new or upgraded infrastructure.

This article originally appeared on www.theaustralian.com.au/property.