Historic Olderfleet building in Melbourne’s CBD sells for above book value but below expectations

The historic Olderfleet building in Collins Street has been sold for about $67 million by the Australian Unity Property managed office trust –below the price expectations of $72 million.

Offers for the intricate neo-Gothic facade building at 477 Collins Street closed last August.

Mark Pratt, the general manager of property, mortgages and capital markets at Australian Unity Property, says selling the property enabled AUI to provide investors with enhanced liquidity and ”higher than expected capital returns.”

“Strong demand, tight supply and a lack of development in Melbourne over the past three years presented us with a unique window of opportunity to maximise the value of the Olderfleet Building on behalf of investors.

“While we considered a range of alternative options including refurbishing the property, we determined the best outcome for investors was to sell the property into an improving market, achieving a sale price above current book value,” Pratt says.

The sale to Aviva Investors Asia Pacific Property Fund – a fund managed by Singapore-based fund manager Aviva Investors Asia Pte Limited – was packaged by the Sydney fund manager Propertylink after being marketed by CBRE, according to the Australian Financial Review.

Its valuation was $65.4 million as at November 2010. As at December 2009 there was a $63 million book value for the building – a decrease of $3.75 million from its 2008 book value.

Olderfleet is 100% leased, and the car park is leased and operated by S&K Car Park Management. Its office tenants include Accenture, CapGemini,  Ernst & Young, Melbourne Conference & Training Centre and Allens Arthur Robinson law firm.

The complex consists of an eight-storey office building behind a series of classified historic facades dating back to 1884 – and protected from demolition during the 1970s building boom by public lobbying – a well as a large car park.

With a dual frontage site of 3,899 square metres, it has more than 40 metres of prime retail frontage on Collins Street.

The office investment has 11,986 square metres of net lettable area and a commercial car park of 598 bays off Flinders Lane.

Located between William and King streets in the CBD's popular western core, the property was offered as substantially under-rented.

It has a net passing income of $5.7 million per year.

The office complex was built by Becton in 1985 behind the row of three historic terraces.

It was sold in 1994 by Becton Corporation for $40 million to Singaporean interests at a yield of 14.75% on its then net income of $5.9 million a year.

The sale occurred about the same time that Michael Buxton retired from Becton, thereby ending his two-decade long partnership with Max Beck.

It was later sold to the Acumen Office Trust established by Multiplex Capital in 2002 for $56 million.

Multiplex Capital achieved strong returns for investors, delivering an income yield of 9% per annum for the two years to 2007, which represented a total return of 11.3% over the five-year period. By 2007 Multiplex Capital had renewed leases for more than 11,000 square metres of space.

In 2007, after sounding out investors, there was a transfer of management rights to Australian Unity Property Limited.

Australian Unity Investments is the funds management arm of financial services, health and retirement living services provider Australian Unity.  It has more than $11.5 billion in funds under management as at January 2012.