Fund managers swap Melbourne office for dramatic discount

After spending c$215 million on 628 Bourke Street, AFIAA is selling for $115.12m.

AFIAA has recorded a dramatic loss selling a major Melbourne CBD office it bought in August, 2017 – a property cycle peak – then renovated.

A tennis court on the eighth floor of 628 Bourke Street.

The Swiss fund manager is recovering $115.12 million for 628 Bourke Street which hit the market last March.

M&G also made a loss selling the office it collected from the 2017 AFIAA swap.

It paid M&G Investments $180.6m as part of a property swap deal.

Garda last year sold two Burnley offices for major discounts to book values.

On that basis alone, its onsale reflects a 37 per cent drop.

However another $35m was then spent on a refurbishment, completed in 2021.

Factoring that, the capital loss for AFIAA circles 47pc.

Formerly known as QBE House, the office carried $200m-plus price hopes when Knight Frank’s Trent Preece, Ben Schubert, Justin Bond and Neil Brookes listed it.

Buyer, local fund manager Bayley Stuart, is set to hold it in a fixed unit trust created in February.

Dramatic drop

Developed in 1989 on 3301 square metres, 628 Bourke St rises 15 storeys with a communal tennis court on the eighth floor.

Containing 24,127 sqm of A-grade office space and retail, it is 90 per cent let but the weighted average lease expiry is short – two years when it was listed.

CPB Contractors is the anchor, occupying nearly half. V-Line, Academies Australia Polytechnic and NTT Data are other high-profile occupiers (story continues below).

Centuria just sold a Canberra office for a large discount on it 2019 outlay.

The refurbishment included a new lobby and retail, end of trip facilities and lift upgrades. The NABERS Energy rating was also lifted to 5.5-star (the NABERS Water score meanwhile is 5-star).

Bayley Stuart bought an East Melbourne office in late 2022.

The agents marketed 628 Bourke St’s development upside, with a structure up to 70,000 sqm able to be considered.

Coincidentally the office AFIAA swapped with M&G for 628 Bourke St – 520 Wickham St, in Brisbane’s Fortitude Valley – also sold for a loss, in November 2022, but of less than 10pc.

Forgettable deals for vendors

The 628 Bourke St deal, believed to have been struck near the start of the year, came shortly after Garda sold two Burnley offices for $80m – a drop on their combined $110.5m June 30, 2023, book value and $120m mid-2022 asking price.

Warren Ebert’s Sentinel Property Group is the buyer, settling this quarter.

Centuria has also been hit by falling demand from both renters and investors in the sector, recently selling commercial assets in Canberra and Maroochydore for a total $53.8m.

It outlaid $66.2m in two deals, in 2019 and 2021.

The country’s biggest office landlord, Dexus, has also over the last two financial years shed a couple of Sydney CBD offices for losses on book values – but between 15-20pc.

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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of