APN Property Group to Sell Half Interest in 567 Collins Street

Ten days after announcing it secured law firm Allens Arthur Robinson as a tenant for a Collins Street office building it hasn’t started building yet, APN Property Group will sell a 50 per cent interest in the asset.

APN is expected to reap around $200 million from the half share sale – in what is the biggest commercial property offering put to the market in Melbourne so far this year.

As well as “cashing up” APN’s coffers, the sale will mean the developer and fund manager doesn’t need to rely on as much debt to fund construction of the tower, which is contractually due for completion in late 2010.

Up for grabs is part of 567 Collins Street – a 33-level, 55,000 square metre A-grade office building to be developed between the 555 Collins Street and 589 Collins Street office buildings, in the south-west tip of the CBD.

The only tenant currently committed to the building is law firm AAR, which leased 13,000 square metres, or 23 per cent of the building – far less than the 40 per cent pre-commitment APN was after before it had start construction.

Engineering firm Connell Wagner is believed to have shortlisted two office buildings including 567 Collins Street for its 10,000 square metre requirement. The other at Villlage Docklands is being developed by Walker Corp and the Singapore-based Kuok Group.

Herald & Weekly Times is also believed to have shortlisted 567 Collins Street for its 18,000 square metre requirement. However it is speculated the publisher will temporarily renew at its current offices in City Road Southbank and look for another – perhaps higher profile - building.

Colliers International chief executive officer John Marasco is marketing 567 Collins Street.

News of a 567 Collins Street sale comes at a turbulent time in Melbourne’s commercial property game.

Earlier this year, the 12-level, 27,000 square metre South Wharf office building – under construction on the banks of the Yarra River in Docklands - was withdrawn from sale after it failed to fetch the $160 million developer Austexx is reported to have been asking.

Acquisitive fund manager Charter Hall was reported to have been the frontrunner to buy that building – but is believed to have walked away from negotiations, after a bout of share market volatility cast a cloud over the listed property market and put many purchasing decisions on ice.

Other “investment grade” office buildings currently on the market in Melbourne include 330 Collins Street, which is expected to fetch about $130 million, 333 Exhibition Street which could fetch about $20 million and 570 St Kilda Road, which could fetch about $30 million.

Last month, Japanese fund manager DaVinci and joint venture partner Multiplex confirmed it would pay $87 million for The Foundry development at 399 Bourke Street. It is planning a 43-level, 63,000 square metre office building for part the site, near the Bourke Street Mall.

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