Sources say Valad was last week in advanced negotiations with the Investa Property Group to buy the 20,000 square metre office.
However the price Valad offered for the building, speculated to be around $80 million, would have translated to a yield of about 6.5 per cent.
This yield may have been acceptable if the property was for sale last year, but is far lower than what investors appear prepared to pay for property in the current environment.
Even A-grade Melbourne CBD office buildings, opposite gardens and on top of a train station sell on yields of around 7 per cent this year, one industry player joked.
Representatives from Valad and Investa failed to return calls, while a spokesman for Colliers International declined to comment.
News of a collapsed deal is the latest in a string of bad news at the coalface of Australia’s institutional property game.
Earlier this week it was reported fund manager and developer Charter Hall dropped by about $20 million – or 10 per cent – the price it would pay for Channel Nine’s outgoing television studios in Willoughby, Sydney and Richmond in Melbourne.
The group is also reported to last month have walked away from a $160 million deal to buy the South Wharf office building, currently under construction in Docklands.
A lack of under bidders, and an apparent freezing by listed property groups to buy new property at present, is giving purchasers much more negotiating power than they have had for a while, one industry source said.
Agents have a tough job ahead of them to sustain the low sale yields reported for most property transactions last year.
Many listed property vehicles have factored in future capital value growth as part of the income to be derived from an asset.
If selling yields increase, commercial property assets will be re-rated and values will most likely head backwards.