$38.5m West Melbourne purchase demonstrates market resilience

Sydney based Australian funds management firm AVARI Capital Partners is behind the second notable commercial sale in West Melbourne in a week, with the acquisition of an office building for $38.5 million.

Whilst Avari Capital Partners is an Australian Based and owned funds management company, it is understood that they have strong links to investors of Chinese Heritage many of whom remain based in Mainland China.

It is the first pure commercial office transaction to be sold to Chinese interests in over 12 months. The last sales have occurred in quick succession with a China’s Guan Dong Provence investor acquiring both 420 St Kilda Road and 424 St Kilda Road for a combined total close to $170 million.

The second of a portfolio of three, the West Melbourne property comprises a six level, 7,362sqm building on a prominent 2,000sqm corner site with more than 90m of frontage. AVARI founder and chief investment officer Alan Liao said the acquisition was in line with the firm’s strategic focus on value-add real estate investment.

“355 Spencer Street represents a structurally sound, superbly designed and aesthetically pleasing building. To knock it down and re-develop would not achieve its best and highest use.

“We will run an extensive refurbishment program including an internal spec fit-out, service upgrades and add end-of trip facilities. We will also activate the central courtyard with a cafe or small bar to provide tenants with an attractive communal space.

“We believe this unique proposition will attract strong leasing interest and will ultimately improve the value of a magnificent building,” Mr Liao said.

CBRE Director Investments, Mark Wizel, who managed the sale with Josh Rutman, Lewis Tong and Scott Orchard, said the outcome had been very pleasing for both the purchaser and vendors.

“In its decision to on-sell the portfolio, based on a less than positive view of Melbourne’s current hotel sector, the vendors have presented some very attractive assets to an obviously hungry market as enquiry and results on the two sales to date have shown.

“In the context of the current market risk factors and forecasts for where the office market may be headed, the pricing is very strong.

“If it provides any indication of what is to come then we may see a much more positive market for the commercial office sector in the near term than anyone would have dared forecast,” he said.

Mr Wizel said the vendors had purchased the three properties as a package for $38.8 million (355 for $27.2m) just under five years ago with a view to hotel development which was to be completed by both commercial and retail spaces as well.

Last week a prominent Melbourne developer paid $9.5 million for the 102-108 Jeffcott Street property, while the last of the three properties in the portfolio, 371 Spencer Street, has attracted good interest to date. The agents have received several written offers, with Mr Wizel stating that the vendor has instructed his team that the asset is now for private sale with an asking price of $10 million.

Mr Wizel also noted that his team have sold seven properties in the last three weeks. These include 583 Ferntree Gully Road, Glen Waverley ($23m), Woolworths Keysborough ($33m), 102 Jeffcott St, and 355 Spencer Street - for a total of more than $120 million.

“There is no doubt that enquiry and transaction volumes for commercial properties have declined as a result of COVID-19, but some of the activity and successfully completed deals we have seen over the past month indicate that astute buyers continue to look for opportunities in what is presenting to be the most uncertain times we have seen since the second world war,” Mr Wizel said.