TE Capital Partners has picked up the KTS House office in Melbourne’s CBD for $145 million.
The 21-storey B-grade building at 350 Queen Street is trading on a 4.8 per cent passing yield.
The precinct around the office is set to substantially activated when two 80-level apartment towers under construction immediately north and east (artist’s impression, right) – part of 3L Alliance’s Queens Place – are complete.
Last March Woolworths committed to a two storey, 1680 square metre retail premises forming part of a five level podium within that $750m project.
Pocket is buzzing
Earlier this month, PDG Corporation launched a leasing campaign for 2000 sqm of retail set to be added to the heart of Queen Victoria Market as part of the $450m Munro site redevelopment.
QVM is 200m from KTS House.
Also in the area, Mirvac recently applied to replace the former federal police headquarters at 383 La Trobe Street with a 31-level, 44,000 sqm office.
That Sydney developer and investor last June paid PDG $333.5m on a funds through basis for a 38-storey, 490-unit build-to-rent tower at 91-111 Therry Street, which is in this pocket, too (story continues below).
Completed in 1990 by local developer Warren Anderson and Japan’s Shimizu Corporation and Itochu, KTS house includes 21,914 sqm of lettable area.
Mr Hay said office floors from level one to 20 were 95 per cent occupied with a weighted average lease expiry of about approximately four years “which is very attractive in this market”.
“Whilst the ground floor retail component offers excellent medium term repositioning potential to capitalise on the increased pedestrian growth as the neighbouring towers are completed”.
Mr Stagg said the agency is fielding “multiple mandates” from offshore groups for real estate in Melbourne’s CBD, it being considered a “safe haven”.
Singaporean groups such as Tong Eng Group, Roxy Pacific Holdings and GIC that are familiar with the Melbourne market are leading the charge as well as those from Malaysia and Japan, the executive added.
TE Capital’s local portfolio includes, around Albert Park Lake, 5 Queen Street and 312 St Kilda Road.
In the eastern suburbs it holds 8 Lakeside Drive, Burwood East, part of the Tally Ho business park.
3L Alliance acquired KTS House, on 7295 sqm of land, from Malaysia’s Kinetics Properties (which has lumbar group KTS Holdings as its parent), paying $135m in 2014.