Melbourne owners proving reluctant to sell

The Reserve Bank of Australia’s latest decision to keep interest rates on hold again signalled that the economy was still sluggish, but it did not stop property investors flocking to auctions during the week.

The low-interest rate environment was tempting more investors to consider borrowing to buy, creating a two-speed economy with the property sector in a higher gear than other industries.

In May, Savills Australia transacted more than $108 million worth of Melbourne commercial property, but dozens of prospective buyers were left disappointed in the keen competition for an inadequate number of development sites, the agency says.

“We urgently require more development sites and commercial properties to meet the unprecedented demand we are receiving from local and off-shore investors seeking to gain a foothold in the Melbourne commercial property market,” according to Savills.

We urgently require more development sites and commercial properties to meet unprecedented demand.

Teska Carson director Michael Ludski also says not enough inner-city owners were willing to part with their properties to satisfy the appetite of suburban developers.

“Any time we bring a potential development opportunity to market we are inundated with enquiries,’’ Ludski says.

Such was the scarcity of opportunities that many developers were willing to buy tenanted buildings and wait until their leases expired before applying for planning permits to demolish and rebuild.

A case in point, he says, is the recent sale of an old commercial building at 9-15 David St, in Richmond, on the eastern outskirts of Melbourne’s CBD.

The 2325 sqm site sold for $5.85 million and has a short-term lease returning $116,780 a year. It is close to the Victoria Gardens Shopping Centre and the Yarra River.

Ultimately, the new owner will apply for planning approval to build a multi-unit tower, Mr Ludski says.

The buyer will join several large developers also building major apartment blocks in Richmond, including Salta Properties (A Place to Live), Lend Lease (Studio Nine), Caydon Property (Cremorne), Hickory Group (Hive Richmond), and Hamton (Haven), among others.

Fund finds police HQ arresting

The commercial sector is keenly watching what moves a number of large property funds will make next after last week missing out on a prime piece of Parramatta commercial real estate – the NSW Police Headquarters.

Unlucky bidders including Cromwell Property Group, Singapore’s Mapletree Commercial Trust and GPT Group, were outmanoeuvred by Growthpoint Properties, a publicly traded Real Estate Investment Trust (A-REIT), largely owned by a South African property group.

The commercial sector is keenly watching what moves a number of large property funds will make. next

Growthpoint will pay $241.1 million to AustralianSuper for the 32,000 sqm building at 1 Charles St, Parramatta, once it has raised funds through an equity offer and expanded its borrowing.

The two-tower building west of Sydney was completed in 2003 to a high environmental NABERS energy rating of 4.5 Stars and has 444 underground car spaces.

Growthpoint told the Australian Securities Exchange it plans to raise up to $125 million by issuing new stapled securities and borrow a further $100 million to pay for the deal. It may also draw down up to $75 million of its existing debt facility.

The NSW Government has a 10-year lease on all the space at 1 Charles St, with an option for a further five years.

Parramatta is fast-growing as an alternative business district to central Sydney, with a number of large organisations already having transferred there.

The suburb is now buzzing with construction activity, including two apartment blocks being built by Meriton Group and Crown Group, a $1.6 billion redevelopment of Parramatta Square and a proposed tower by Leighton Properties.

Meanwhile, Growthpoint managing director Timothy Collyer says last week’s deal was part of the fund’s ambition to buy more A-Grade properties in NSW, which now comprises 22 per cent of its portfolio.

Fortune smiles on Chinese buyer

A Chinese investor’s off-market purchase of an IGA supermarket in the north Brisbane suburb of Boondall was peppered with the lucky Asian number eight, which is linked to prosperity.

The buyer paid $3,398,888 for the 790 sqm supermarket on 3434 sqm of land at 2138 Sandgate Road.

It was developed by Hardev Property two years ago and includes a graded car park for 50 vehicles.

IGA Boondall has a 10-year lease with a further three five-year options, saysSavills Australia agent Michael Harcourt.

Other deals done by Savills this month include:

  • The off-market sale of the 14-level building at 22 King William St, Adelaide, for $41.8 million. National Australia Bank occupies two thirds of the 9640 sqm space on a long lease. Other tenants include the SA Government  Department of Health and the Commonwealth Government Ombudsmen.
  • The leasing to BBQs Plus of a 489 sqm site in the homemaker centre at 98 Hampstead Rd, in Maidstone, 8km west of Melbourne’s CBD. The new tenant is relocating from Ascot Vale and also operates outlets in Hampton and Port Melbourne. The bulky goods centre is owned by private family investor PBJ Fibrelux. The site will be vacated by Haymes Paintright, which pays  $85,000 a year in rent.