Collective Capital has made another counter cyclical play, this time on a Melbourne office.
The 11 level, 5200 square metre China Southern Airlines headquarters at 342-348 Flinders Street is setting the local investment house and developer back a speculated c$40 million.
On the north east corner of Bond St, the asset is opposite the Q2 strata office – which rises 13 floors.
It is also near the outgoing Victoria University city campus, a 19 storey tower at 300 Flinders St, which sold last November for $80.8m.
Those buyers, Futuro and Marprop, are planning a repositioning with a lower level retail arcade and conversion of the upper campus floors to offices (it is also speculated one tenant has already been found to occupy the latter component).
Collective will utilise a Commonwealth Bank of Australia green loan to fund a major refurbishment, upgrading 342-348 Flinders St to a better version of B-grade than it is now for 30 per cent less emissions.
The asset would then be re-offered for lease with signage rights; it is exposed 180 degrees to Flinders St station, the Yarra River and Southbank.
Elsewhere in the CBD, Forza Capital last December snared a mid-1980s office, 399 Lonsdale St, also with plans to utilise a CBA loan of this type for a sustainability-focused restoration.
“Proud moment”: Collective goes green
The China Southern Airlines building purchase comes two years since Collective, directed by Nicholas Thompson and Dale O’Dwyer, outlaid $20m for a five level Frankston office on behalf of the Collective Capital Investment Fund.
Then 22pc vacant, it is now fully let after a $2.1m refurbishment.
The company also recently restored the long-time ex-Dennis Family Homes headquarters in Malvern East.
That asset has been re-tenanted too.
In inner-north east Collingwood, Collective is completing an eight storey office at 33 Peel St.
“We’ve built our business on a counter-cyclical investment thesis,” Mr Thompson said following the Flinders St deal.
“Like our Frankston property…before it, we tend to buy when the market is baulking,” he added.
“Being able to partner with CBA on a green loan facility, which will be used specifically to enhance the building’s energy efficiency and cut overall building emissions by 30pc, also represents a proud moment for our operation,” according to the executive (story continues below).
“We’ll immediately begin repositioning and upgrade work with the intention of 348 Flinders St becoming the best B-grade office offering in Melbourne.
“We firmly believe the market will follow”.
Collecting outside Melbourne
Outside of Melbourne, Collective last August spent $29.5m, reflecting a 6.26pc yield, for an Albury retail investment on 1.425 hectares.
Also mid-last year it committed $11m for Canberra’s Questacon Administration Building – the former Royal Australian Mint office – which was offered by the federal government with a 10 year leaseback.
That deal was struck on a high 8.6pc gross return.
In 2019 Collective paid Elanor $14.7m for a newly completed office at 157-159 Bunda St, Cairns, leased to the state government.
Tenants were on short and medium term leases, meaning the asset was marketed as both an investment or for its refurbishing/repositioning upside.
“This is the fifth transaction conducted by the…Colliers Melbourne City Sales team over the past 18 months in the Flinders St and Flinders Lane precinct totalling approximately $280m,” Mr Stagg said.
“Purchaser demand is being driven by the $9 billion Melbourne Metro tunnel project and $100m restoration of Flinders St Station,” he added.
“The Melbourne Metro tunnel project includes the new Town Hall train station and mixed use over-station development by Lendlease which shall include retail and commercial tenancies,” according to the executive”.
“Strategic investors throughout Australia and offshore such as Collective Capital are seeking to capitalise on what is the biggest infrastructure project in the Melbourne CBD since the City Loop in the 1980s”.
Subscribe to our newsletter at the bottom of this page.