Interests associated with Nonda Katsalidis and Eureka Tower purchased the property on an effective yield of about 4.2% and reflects, according to the selling agent, the future development potential of the site.
Comprising two buildings located at the south west corner of City Road and Southbank Boulevard and known as 66-68 & 70 Southbank Boulevard, the two level separately titled buildings have a net lettable area of 2,828 square metres on a land area of 2,642 sqm (nearly 2/3 of an acre).
The building tenancies are underwritten by the anchor tenant major public company Incitec Pivot which occupies all the office space with the only exception being the corner retail showroom area at 66-68 Southbank Boulevard leased to trading company Tai Mao Australia Pty Ltd.
The property has frontages of 50.77 metres to City Road and 46.39 metres to Southbank Boulevard and holds a coveted Mixed Use zoning under the Melbourne Planning Scheme.
There is also a third frontage to Fawkner Street at the rear of the property of another 59.13 metres.
The flexible zoning encourages high rise residential or commercial development to support the city function and local area.
Potential for hotel, residential or commercial tower or a mixed development projects highlights the sites future development flexibility.
Importantly the tenancies also benefit from 47 on site car parks, including 34 that are under cover.
The net building income is currently $603,162 but there are substantial building depreciation opportunities for the new owner, principally from a recent renewal of the building air conditioning system.
“Importantly all leases include a redevelopment clause; the lease to Incitec Pivot includes a redevelopment notice that can be given to the tenant at the expiry of the first five years with the lease commencing from 1 November last year with a one year notice," said the selling agent.
“The lease to Tai Mao Australia provides that a redevelopment clause is exercisable after 31 October 2008 by giving the tenant six months notice.
“The property offers a strong initial cash flow as a fully leased commercial office investment with future redevelopment potential.
“There are a number of major holdings in this precinct, while the Eureka Tower and new Freshwater Place developments are diagonally opposite as are the head office of the Herald and Weekly Times, the ABC and it abuts the Arts precinct.
“The prominent BMW dealership and headquarters is also immediately opposite.
The two buildings have been substantially refurbished over time to contemporary building and services standards.
“We anticipated that with the significant high profile position of this property, the tightly held nature of the immediate precinct and the potential for future commercial and or residential development that this Southbank property would attract offers well in excess of $10 million plus.