Melbourne 13 April 2016 – Melbourne’s Metropolitan Hotel is the latest CBD asset to change hands in a flurry of transactions this month totaling more than $15 million.
The Metropolitan Hotel was snapped up by a local investor for $8.61 million following a hotly contested auction, which attracted a crowd of over 200 onlookers.
The iconic corner street pub, located at 263-265 William Street, has a rich history spanning 160 years, with the sale marking the first time the high profile venue has been offered to the market in two decades.
The sale reflected a sharp yield of 2.38% - the strongest ever received for a Melbourne CBD pub.
CBRE’s Josh Rutman, Mark Wizel, Paul Tzamalis and Scott Callow negotiated the sale in conjunction with Killen Thomas agent David Marks.
Mr Rutman said the hotel’s sale attracted widespread buyer interest, as evidenced by the auction.
“This sale was a reflection of the market’s strength on so many fronts,” Mr Rutman explained.
“We saw local investors compete head to head with a number of offshore parties in a bid to gain a footprint in one of our most famous precincts.”
He added: “With nine bidders competing on the day, many being multiple CBD owners, the appetite for well-located corners in the city is evident. Despite the short lease on the property and limited development potential, buyers have clearly recognised that these corners are in very short supply and are willing to bid aggressively when they come up for sale.”
Mr Rutman said in addition to strong offshore interest, there was also a number of existing CBD property owners bidding for the asset.
“Given their positive experience with their current holdings, local investors continue to be net buyers of core property in the city as opposed to net sellers,” Mr Rutman said.
Lazaros Papasavas – multiple owner of CBD assets and one of the underbidders for the property on the day - commented on the market:
“We've been very encouraged by the activity and growth in the CBD market over the last 12-18 months, and as experienced owners of CBD real estate for over 40 years and seeing the appreciation in this asset class first-hand, we are continuing to actively seek out high quality CBD freeholds,” Mr Papasavas said.
“We believe we understand the value of this market well and, despite prices increasing, we see great value in the CBD as a core destination for our family's investment over the medium to long term.”
In addition to the sale of the Metropolitan Hotel, The Great Western Hotel at 204-208 King Street has also changed hands for $6.5 million, reflecting a yield of 2.9% return.
Mr Rutman said the recent transaction flurry was testament to the growing strength of the western end of the CBD.
"We are experiencing the strongest selling conditions in the Melbourne CBD in more than 30 years and there is no fundamental indicator pointing to why it should slow down,” Mr Rutman explained.
CBRE Senior Director Mark Wizel said property prices in the Melbourne CBD were eclipsing the highs of 2007.
"The cost of debt is low, confidence is improving both from consumers and tenants and this is having a very positive effect on investor sentiment,” Mr Wizel said.
"We thought it would be a long time for properties to consistently trade in the CBD on yields below 5%. It has come a lot quicker than expected and we think that it is here to stay as supply of sub $20 million assets in the Melbourne CBD continue to be limited."
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