Bayley Stuart buys $50 million Cremorne office from CostaFox on fund-through basis

Artist’s impression of Bayley Stuart’s office at 600 Church Street, Cremorne.

Boutique property investor Bayley Stuart Capital is paying CostaFox Developments $50 million for an unbuilt office at 1-11 Gordon Street, Cremorne, in Melbourne’s inner east (artist’s impression, top and below).

The off-market deal, on a fund-through basis, was negotiated by agency Dawkins Occhiuto.

It is Bayley Stuart’s second fund-through office purchase in the area: 17 months ago, it paid local developer Icon $50 million for a nine-storey, 5799 square metre asset at 600 Church Street (artist’s impression, right).

Under construction and replacing the former Nuttelex butter factory, 600 Church Street was recently part-leased to Domain, which was last year acquired by Nine (Domain’s larger rival, REA Group, is headquartered nearby at 511 Church Street, Richmond).

CostaFox meanwhile, which was established by former Little Projects director Michael Fox and Geelong businessman and developer Robert Costa, is pushing forward with plans to build (and one could reasonably imagine, possibly sell) another eight-level strata-titled Cremorne office at nearby 28 Gordon Street – a 974 sqm site it acquired in April for $11.5 million.

Bayley Stuart’s newest acquisition: 1-11 Gordon Street, Cremorne

It was only 14 months ago that CostaFox applied to replace 1-11 Gordon Street, Cremorne, with a premium quality eight-storey, 5464 sqm strata-office complex with ground floor retail.

The Fieldworks Architects penned complex, with interiors by Mim design, was set to deliver 21 premium quality office suites to the market in a project branded Encore.

CostaFox has appointed Hacer to start building next month.

However, managing director Michael Fox said, “after our initial marketing teaser we were approached by an investor who purchased the building as a whole”.

CostaFox’s proposal for 1-11 Gordon Street, Cremorne.

Bayley Stuart is expected to now lease the property, ending the Encore strata-titled proposal.

Established by real estate veteran Alasdair MacGillivray – and Andrew MacGillivray – Bayley Stuart is cashed up after selling an office at 541 St Kilda Road late last year for $65 million.

The sale price of the Cremorne office values the lettable area at $10,000 per sqm, which Mr Fox believes is a record for a vacant Melbourne inner city building.

CostaFox development director Geno Hubay said the distinctive design of the proposed 1-11 Gordon Street – with a full glass curtain wall above a heritage listed façade – was a key to it achieving a record sale price.

“The building also has amazing end of trip facilities” Mr Hubay said, adding CostaFox took ideas from some of the amenity offered in luxury residential apartment buildings to implement in its office proposal.

“Tenants have a common area that they can use free of charge and includes a BBQ area in a garden environment”, Mr Hubay said.

Cremorne’s imminent skyline

A pocket of Richmond abutting the Yarra River, two kilometres from the city, Cremorne is one of metropolitan Melbourne’s most valuable suburbs to rent an office – commanding in excess of $600 per square metre, per annum, for high quality space.

Not surprisingly, developers have swarmed to the area to propose new stock in recent years.

A subsequent building boom is now hard for commuters to miss.

The first major office to be rising – at 60-88 Cremorne Street – will be headquartered by employment website Seek, which will relocate from St Kilda Road.

At seven levels, this $150 million campus style building will contain 19,300 sqm of area, and accommodate 900 staff from 2021.

Caydon is also constructing an office: 17-21 Harcourt Street is set to be the headquarters of software giant MYOB which will relocate from Glen Waverley, 19 kilometres south east of the city.

Late last year, Caydon sold this nine-storey, 9600 sqm building to AXA Investment Managers for about $100 million on a fund-through basis.

Following its completion, MYOB will become Cremorne’s biggest office occupier.

Caydon is also proposing to build strata-titled commercial suites into the distinctive Victoria Bitter silos – an address soon to be known as 10 Gough Street (artist’s impression of the completed project, below).

Artist’s impression of Caydon’s proposed strata-office development – which we reported in August is earmarked at 10 Gough Street, Cremorne.

Next door to this site, at the corner of Punt Road, Caydon in August announced plans for a 12-level, 15,373 sqm office. This site was until recently earmarked in the Richmond silo redevelopment master-plan to make way for a residential complex.

Alfasi Property, which only recently got into the large-scale development game, in September started construction of a 10-level, 18,599 sqm office at 510 Church Street (according to this AFR item last week, mining giant BHP could be considering occupying part of it, relocating out of the Melbourne CBD).

Zig Inge Group is building a seven-level commercial building on the airspace of a former Rosella factory at 57-61 Balmain Street (the majority of which has been leased to Reece, which will relocate from Burwood, about 14 kilometres east of the CBD).

In June we reported that developers Gus Cooper and Michael Gannon (who are building the Seek headquarters) were proposing a public plaza and two offices – one rising 10 storeys – on a unique rectangle site at 68-88 Green Street (artist’s impression, below).

Gus Cooper and Michael Gannon’s proposal for 68-88 Green Street., Cremorne.

Offices of seven levels or more are also mooted for sites at 9-11 Cremorne Street, 60 Cremorne Street, 19 William Street, 12 Albert Street, 77 Stephenson Street, 64 Balmain Street and 11 Pearson Street.

This year we have reported about two noteworthy Commercial 2 zoned development site sales, the latest which priced every square metre of land at a record high $13,600.

Interest in Cremorne office investments has been high, too – as evidenced by the two Bayley Stuart deals since 2018.

Four weeks ago, we reported that Victoria’s richest woman Naomi Milgrom spent about $95 million for Building 10/658 Church Street – almost twice the price the vendor, BlackRock, paid in 2016.

Ms Milgrom paid $44 million for the neighbouring three-storey Building 8/658 Church Street, in 2017.

Artist’s impression of Seek’s next headquarters at 60-88 Cremorne Street, Cremorne.

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Marc Pallisco

A freelance property analyst and journalist, Marc is a co-founder of realestatesource.com.au.

Marc Pallisco
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