Major Southbank office tower up for grabs

The tower at 28 Freshwater Place in Melbourne’s Southbank.
The tower at 28 Freshwater Place in Melbourne’s Southbank.

Melbourne’s office market is about to be tested by JPMorgan Asset Management, which has put a Southbank tower on the block for more than $400 million.

After fielding inquiry on the Twenty8 Freshwater Place tower for months, the US funds manager has now signalled it is willing to sell either the entire asset or even a half interest.

JPMorgan Asset Management’s Asia-Pacific property fund picked up the entire complex for $286 million in 2016 from Frasers Property Australia and the GPT Wholesale Office Fund.

The A-grade office tower then traded at an initial yield of 6.6 per cent, but prime Melbourne buildings are now changing hands for about 5%

The 25-level complex houses blue-chip tenants including CPA, MMG Australia and WSP Australia, and is the first major Melbourne tower to hit the open market since April last year.

JLL’s Leigh Melbourne and Nick Rathgeber are selling the tower.

Melbourne says an existing A-grade office building in the Melbourne CBD market has not been offered for sale since the second quarter of last year, when QIC offered 80 Collins St, which sold to Dexus.

“The strong lease covenants, including major tenants CPA and MMG, has significantly improved the building’s income profile,” he says.

“It is arguably the most vibrant and accessible ­location in Melbourne and once tenants experience the building and the precinct, it is very difficult for them to leave.”

Rathgeber says there was a shortage of existing prime office assets in Melbourne.

Twenty8 Freshwater Place is a mixed-use, masterplanned development on the banks of the Yarra, in Southbank. The 34,000sqm tower has undergone a multi-million-dollar upgrade.

Southbank is a keenly sought location by property investors. Last year, GPT’s flagship office fund bought the remaining 50 per cent stake it did not already own in a nearby office tower from Frasers Property for $342 million.

In that deal the GPT Wholesale Office Fund, which bought into 2 Southbank Boulevard in 2014, exercised its pre-emptive right to buy the stake in the building from the Frasers unit.

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