AMP Capital has turned back the clock more than 80 years by snaring a landmark Melbourne CBD property for $39 million.
The financial services giant had to beat off local and offshore private investors, as well as international hoteliers, to buy back the building it developed in 1931 to house its Melbourne operations.
The 425 Collins Street building has been sold by the Indonesian-based Halim family which snared the property in 2001 for $14 million.
The property had been expected to fetch more than $40 million through an international expressions of interest campaign conducted by CBRE's Kiran Pillai, Mark Wizel and Josh Rutman.
The $39 million sale price reflects a passing yield of 5.07 per cent for the 10-level office-retail building and a building rate of $7250/sqm.
The yield is a far cry from the 14 per cent it was returning when the Halims bought it 14 years ago.
The latest deal comes on the heels of a solid sales run in Melbourne's 'mid-town' precinct, including 520 Collins Street, which sold for $51 million on an initial yield of 6.7 per cent.
"The location and the flexibility of the asset were the key trigger points for the majority of interested parties," says CBRE's Kiran Pillai.
"As quality opportunities are becoming harder to uncover in the traditional $100 million-plus space, institutional capital is starting to gravitate to prime assets in this lower price bracket, which is creating an unparalleled level of competition and driving prices to levels we have never experienced in Collins Street."
CBRE says more than $3 billion worth of office, retail and residential development is either planned or under way in Melbourne's mid-town, including Cbus's proposed $1 billion redevelopment of 447 Collins Street which is directly opposite the AMP building.
The property has been acquired by AMP's Wholesale Australian Property Fund, which has been one of the most active domestic funds in the market of late, having recently exchanged on the Stud Park Shopping centre in Rowville for $154 million.
CBRE's Mark Wizel says the 425 Collins Street campaign generated interest from a diverse range of buyers, with particularly strong interest from Chinese and Singaporean hoteliers looking at a future conversion of the asset.
"The building's high-profile corner position in a developing location, in addition to extensive on-site car parking, provided the ideal ingredients for these offshore hoteliers, who are one of the most aggressive buyer groups we're dealing with at present," Wizel says.
"Anything with presence and an income position which allows for future redevelopment is attracting incredibly strong interest at the moment, especially given the recent changes to the planning scheme in the CBD, which has created an element of uncertainty for these groups."
Designed by Bates, Smart and McCutcheon, the heritage-listed 425 Collins Street has a lettable area of 5350sqm. It provides a diversified income from the office and retail space, which includes a bar and restaurant.