Melbourne CBD hotel, apartment project dumped

The view from the Spring St tower in Melbourne.

Golden Age and partner Starwood Capital have dumped plans for a $600 million apartment and hotel complex on Melbourne’s Spring St and are selling the site to Proprium Capital Partners Australia in a $114 million deal.

The dramatic, and profitable, exit by the pair displays the big switch in the national development market, with apartment projects on hold as demand softens and office schemes are proposed as vacancy rates drop.

Proprium Capital is likely to pursue a repositioning of the existing 1980s tower at 85 Spring St, looking to pick up tenants displaced as new projects are undertaken across the city. It could also work up a longer-term office scheme of its own once it gains control.

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The deal is being brokered by agents CBRE which, along with the parties, did not comment.

The will deal leave Golden Age cashed up as it rolls out its $4 billion development pipeline along the east coast, with a focus on luxury residential and apartment projects.

The group, set up by Jeff Xu in 2006, has also moved with the times and is working with developer Time & Place on the $280m Victoria Place office development in East Melbourne as part of a shift into commercial assets.

The 10,700sqm Spring St building is the headquarters of finance company Esanda and was built between 1984 and 1988.

The 16-storey building was slated to be redeveloped into a 44-storey apartment tower by construction giant Grocon, which bought the site for $45 million in 2013. Grocon cut back that 44-level proposal to 39 levels and reduced the number of apartments to about 225 after it was initially refused a permit.

Golden Age then swooped on the L-shaped site that fronts both Little Collins and Spring streets in January 2017 in a $75 million deal. It relaunched it as a $400 million, 39-level residential project, with 138 apartments and a $200 million, 26-­storey hotel fronting Little Collins Street. Starwood came into the project in late 2017 and was to have jointly managed the 250-room luxury hotel component.

Proprium Capital’s move follows plays by Charter Hall and Mirvac, which have also swept up former Melbourne apartment projects where they are now planning office towers.

Apartment developers are moving away from the under-pressure inner-city Melbourne market, with a series of sites selling last year to buyers with alternative plans.

Charter Hall bought its site from Fragrance for $140 million after the Singaporean group suffered sluggish pre-sales.

Mirvac bought another Melbourne CBD site for an office project for $122 million from China-backed Sterling Global, which had planned units and a hotel.

Proprium Capital last year sold 72 Christie St in Sydney’s St Leonards to Singaporean company UOL for $154 million.

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