Flight Centre sells St Kilda Road headquarters to Shakespeare PG for $62.15m

Flight Centre is following through on its post COVID-19 action plan to unlock equity and continue trading – selling its St Kilda Road headquarters, in Melbourne, for $62.15 million.

The ASX-listed retailer, hard hit by the near-halt in travel, has also completed a $700m capital raising.

It paid $31.3m for 436 St Kilda Road in 2008 before undertaking a renovation, moving in, and collecting an income renting the portions it didn’t occupy.

During the 2009 Global Financial Crisis led slowdown, the travel agency put the office up for public sale seeking $25-$30m, before withdrawing it.

Coincidentally one of the brokers which represented it then, Paul Burns, represented Flight Centre selling it this year – when an off-market marketing strategy was instead adopted.

The vendor offered the 11-level, 7506 square metre building with a pre-commitment for three quarters of the lettable office space.

The purchaser is Shakespeare Property Group, the property investment arm of Prime Value Asset Management, which was co-founded by Yong Quek in the late 1990s.

Shakespeare is familiar with the strip owning 601 St Kilda Road, a triple fronted block which is making way for a $350m residential project, Magnolia at St Boulevard, containing three towers, two of them rising 20-levels.

Flight Centre’s 436 St Kilda Road headquarters in demand because of COVID-19: agent

Flight Centre’s headquarters is at the desirable top end of St Kilda Road – but it isn’t on the most valuable eastern side, which abuts Fawkner Park.

It sits on a 2317 sqm plot three kilometres south of town.

Five businesses, including soccer’s state governing body Football Victoria, occupy the property.

Mr Burns said numerous parties made offers to buy the asset.

“Ultimately the deal was negotiated in an abbreviated timeframe and subject to a very short due diligence,” the executive added.

“Whilst in some areas of the market COVID-19 has bought on a wait and see approach amongst buyers, securely-leased investments remain highly sought after as cashed up investors are more motivated to set themselves in bricks and mortar with income.

“Buyers taking a long-term view beyond the COVID-19 environment recognise St Kilda Road’s fundamentals have it well-placed to maintain its strong performance of recent years”.

Mr Burns said investors and developers have been favouring office use along St Kilda Road after a period in which multiple properties were converted to residential, as tenants are seeking accessible city fringe locations with quality lifestyle amenity in greater numbers.

“These factors have driven vacancy rates down and put upwards pressure on rents, and subsequent demand for St Kilda Road assets has been reflected in ongoing value increases over recent years.

“Investors have been actively pursuing St Kilda Road buildings with value-add and repositioning potential, looking to take advantage of Melburnians’ increasing preference to live, work and play across the inner city,” Mr Burns said.

“My understanding is that SPG see this as an opportunity to buy a strategically located office property, in this case located a short distance from the future Anzac Metro station that will further enhance accessibility to St Kilda Road.

“The dearth of investment opportunities in this precinct encouraged the buyer to act quickly, and they will now set about adding value to the property and deliver strong returns to their investors”.

Anzac station, part of the $11 billion Metro Tunnel project, is due to open in the vicinity by 2025. Domain Interchange, Albert Park Lake and Royal Botanic Gardens are also nearby.

“In a market with a shortage of available quality stock, pent-up demand means a number of buyers are ready to pounce when opportunities arise,” Mr Burns said.

“The depth of buyer interest from domestic and offshore parties, and the feedback received during the campaign demonstrated Melbourne has retained its safe-haven investment status, even throughout the uncertain climate”.

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Marc Pallisco

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