Deague Group lists three Melbourne car park investments

Yesterday Deague Group quit management rights at The Blackman hotel on St Kilda Road. Today it listed the multi-level car park for sale.

EXCLUSIVE

Deague Group has listed three Melbourne car park investments including the only one directly accessed from Collins Street.

The properties are for sale individually or as a whole.

Assuming a yield of less than six per cent yield, they could collect more than $35 million.

The listing comes a day after the vendor announced it quit its management agreement at 21-level hotel The Blackman, which it built, at 452 St Kilda Road.

The car park within that complex – three storeys and with 80 bays and three storage units – is part of the portfolio just listed for sale, and expected to sell for about $6m.

Three weeks ago, Deague offloaded Brisbane’s Fantauzzo Hotel to Belgium-based, Syrian billionaire Ghassan Aboud for $75m.

The Melbourne car park portfolio

Fitzroys’ Paul Burns and Chris James are marketing the car parks, saying after many years, “the vendor recognised the purchaser demand that exists for securely leased investments where cash flow is assured”.

All up, they said, the properties generate annual rent of $2.045m.

The most valuable – over six floors and with 523 bays (or 650 when stacked) – is at 1 Queens Road in the St Kilda Road precinct, about three kilometres south of the city.

This property was last on the market three years ago but withdrawn when that September downturn hit; it is estimated now to be worth just under $20m.

Beneath a 14-floor serviced office complex also developed by Deague, it contains 61 storage units.

The final asset, in the CBD, includes 74 bays (or 110 when stacked) and is under the 20-level 440 Collins Street commercial building and hotel.

The agents described this property as a generational opportunity to secure the only car park in Melbourne to have direct access from Collins Street.

The portfolio’s Weighted Average Lease Expiry is 5.37 years (story continues below).

Car parks will be more popular post COVID-19: agents

Mr Burns said the three car parks have operated over many years as profitable businesses.

“COVID-19 has had an impact on the local, national and international property markets,” according to the agent.

“Secure cash flow is more important than ever.

“Commercial car park investments are likely to be particularly strong post-COVID,” because “employees will inevitably prefer driving to work as opposed to using public transport”.

Employers will secure parking bays to accommodate this preference, he added.

Additionally, because various level of government have not encouraged as many in new developments – they have become a commodity.

“Over many years, there has been a trend towards new buildings including minimal car parks,” Mr Burns said. “This, together with the ongoing removal of on-street parking for bike lanes and tram super stops, development of new office and residential projects on car parking sites, and the fact that public transport has not been unable to keep pace with increasing demand from population growth makes the demand outlook for existing car parks very bright”.

“The tenants in these assets have committed to not seek any rent relief as a consequence of the COVID-19 situation, guaranteeing the purchaser a 100% return on their investment, without interruption.

“The secure lease agreements offer no vacancy risk for almost six years, and, if or when a lease expires, there are negligible re-leasing costs,” the broker added

Mr James expects domestic and offshore investor interest describing the portfolio as an ultra-rare chance for investment portfolio diversification into the sought-after asset class, which is offering exceptional capital growth prospects.

“Very few investment-grade car parks have changed hands nationwide in the past three years,” he said.

Some which have, Mr Burns added, achieved yields between 4 and 4.5pc in COVID-19 conditions.

On those numbers, Deague could be set for a $45m-$50m payday.

The St Kilda Rd Towers strata office complex at 1 Queens Road, Melbourne, about three kilometres south of the CBD.

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Marc Pallisco

A former property analyst and journalist, Marc is the publisher of realestatesource.com.au.

Marc Pallisco