Forza Capital is banking on an upturn in Melbourne CBD office leasing demand, picking up a B-grade investment with plans for a sustainability focused refurbishment.
The 11 level building, 399 Lonsdale Street, at the south west corner of Hardware Lane, is costing $86.8 million, reflecting a 5.09 per cent yield.
The vendor, Hong Kong backed Cheerich Pty Ltd, paid $31.5m – a 10.06pc return – in 2013.
That seller, FKP, only made a modest capital gain after outlaying $30.18m in 2006.
Also known as Taylors House, the asset is opposite an office converted apartment building which Brady Group acquired for c$80m in October with plans to repurpose as a hotel.
Completed in 1986 and last refurbished 21 years ago, Taylors House, in the city’s legal precinct, contains 10,033 square metres of lettable area and 14 basement car parks.
Education groups including Academia, the Australian Technical and Management College and The Hotel School Melbourne are amongst its office occupiers.
The site spreads 1223 sqm.
With a short Weighted Average Lease Expiry (less than two years), Forza is planning to reposition the asset to an A-grade standard and activate the basement for a new hospitality space – capitalising on its Hardware Ln exposure (story continues below).
End of trip facilities will be added too while the entrance will be upgraded.
“Forza Capital will also pursue a sustainability upgrade to the building, working with our funding partner Commonwealth Bank to achieve a 30pc reduction in emissions over the next two years,” director James Kelly said.
“Through CBA’s recently launched Property Sustainability upgrade program there is no line fee and no establishment fee on the loan component that relates to sustainability upgrades,” he added.
The capital works are expected to cost c$19.5m.
Teska Carson’s Adrian Boutsakis and Larry Takis represented Cheerich.
The deal comes a fortnight since Forza paid Sentinel Property Group $41m for a B-grade Brisbane office, 200 Creek St, which is also set for a green focused refurbishment backed by a loan from the federal government’s Clean Energy Finance Corporation.
Last month, Forza sold two industrial properties, at Blackburn and Blackburn North, to EG’ Australian Core Enhanced Fund, for $79m reflecting a 4.9pc yield.
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