Flight Centre to sell St Kilda Road Victorian headquarters, again

Occupants have access to a gym at 436 St Kilda Road.

ASX listed Flight Centre is readying to sell its Victorian headquarters in Melbourne’s St Kilda Road.

The travel agency, one of the first and harder hit businesses affected by the COVID-19 outbreak, can expect about $60 million for 436 St Kilda Road, sources say.

It paid $31.3 million in 2008 before undertaking a renovation.

The 11-level, 7524 square metre office occupies a 2317 sqm plot adjacent to the busy junction where Kings Way merges with Toorak Road – toward the top of the street.

Flight Centre tried to sell it in 2009, during the Global Financial Crisis led downturn, with price hopes of $25-$30 million.

The year later it decided to retain it. The company collects an income renting out parts of the building it doesn’t occupy.

The vendor will offer 436 St Kilda Road with a leaseback for its portion, sources added.

Busy period for office deals in this pocket of St Kilda Road

The tree-lined street stretching about five kilometres south of the city but zoned Melbourne with a postcode 3004 has over the past 25 years seen many tired offices replaced with apartment buildings – resulting in a mix of investors and developers contending for sites.

Last June, Hong Kong’s Mars Family Holdings paid more than $60 million for Iloura Plaza – a low rise office on a 4465 sqm block on the south west corner of Kings Way – four holdings north of the Flight Centre’s office.

That asset, 424-426 Kilda Road, was offered by Woodlink with plans for a $360 million redevelopment proposal including apartments and a 176-room Marriott Hotel.

Only weeks earlier Mars spent $90 million on 420 St Kilda Road an office investment at the north west corner of Kings Way. The vendor, Vantage Property Investments and US-based private equity firm KKR paid $68 million in 2017.

…and elsewhere in the strip

Four months ago Vantage Property Investments paid members of the local Lederman family $58 million for 574 St Kilda Road following an off-market deal.

In December, 2018, German fund manager GLL Real Estate and Sydney’s Marprop outlaid $65 million for 541 St Kilda Road – an office the vendor, local investor and developer Bayley Stuart, acquired for $47.8 million in 2016.

A month before, Sydney developer and shopping centre owner John Beville sold 509 St Kilda Road for $163 million after paying $84 million in 2014 (this asset occupies an enormous 6070 sqm parcel and is on the more valuable eastern side of the strip abutting Fawkner Park).

Also two years ago VACC sold its headquarters of 60 years, #464, for $95.4 million, later buying an $8.8 million site at 644-658 Victoria Street, North Melbourne, it intends to replace with a four storey headquarters.

However, a three-storey block of flats at 541 St Kilda Road, also listed in late 2018, failed to trade following a campaign targeting residential developers where price hopes were c$30 million.

Flight Centre’s financial year of extremes

South Brisbane based Flight Centre – Australia’s largest travel retailer – late last month released a response plan to the coronavirus epidemic focusing on costs, cash and liquidity.

The company said prior to the “never before seen [travel] restrictions”, total transaction levels had fallen to between 20-30 per cent of usual.

“In contrast to the coronavirus’ emergency, FLT was on track to deliver record 2020 fiscal growth (FY20) sales after generating $12.4 billion in first half TTV (11.2 per cent growth on the record prior year result) and further monthly records in both January and February,” it added.

Now, it intends to “immediately and significantly reduce costs globally and where possible preserve cash”.

It would access additional liquidity in the short term, it added, “to ensure it retains a robust balance sheet and liquidity position to enable it to manage through the current crisis”.

“The company is well progressed in pursuing relevant initiatives”.

A day before releasing the response plan, Flight Centre temporarily stood down 6000 of its support and sales staff – 3800 in Australia – and flagged further job losses.

It also shut many stores and started negotiating with landlords to amend leases.

At the start of this year Flight Centre’s global workforce was about 20,000.

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Marc Pallisco

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