A locally based investor has paid $22,500,000 for a Bourke Street freehold in a stand out result for the Melbourne CBD.
The freestanding, three-level building is currently occupied by OPSM. However, a new lease has been signed with a hospitality tenant, with fit out and possession to occur early this year once OPSM vacate the 384 Bourke Street property.
CBRE’s Melbourne City Sales team of Mark Wizel, Julian White, Chao Zhang and Nathan Mufale negotiated the transaction, which represents a major price uplift of 50% since the property was acquired by the vendor in late 2015 for $15 million.
Based on the new lease arrangement, which includes only limited rental increases throughout the duration of the 10-year lease term, the sale was struck at a tight yield of just 2.6%.
The 1,047sqm building had only a limited frontage of 10 metres to Bourke Street, with the result equating to a building rate of $21,482/sqm and $47,771/sqm on the land rate.
This demonstrates a major premium to another recent sale at 418-422 Bourke Street which was struck at a $17,053/sqm building rate and $32,283/sqm land rate.
“The result for 384 Bourke Street is very telling, demonstrating the current investor confidence in Melbourne CBD investments,” Mr White said.
“The compressed yield highlights that investors are banking on further interest rate cuts to create a greater yield spread between rentals and acquisition costs. Investors are also hunting for trophy assets and are less phased by immediate rental returns given the CBD’s strong underlying market fundamentals.”
Ten offers were received for the property, with a strong mix of local and Asian backed investors.
CBRE’s Chao Zhang said; “The depth of interest from Asian bidders, including a number of parties who are new investors to Melbourne, was a very exciting feature of this campaign.
“Whilst the buyer has other properties holdings here in Melbourne, there was strong bidding from groups that have yet to buy here before. This clearly highlights the interest from abroad in quality investment opportunities in Melbourne.”
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