West Melbourne office building sold for $38.5m

West Melbourne office building sold for $38.5m

Property transaction activity in West Melbourne has been buzzing recently with a group of vendors selling two assets for a combined value of $48 million.

Agent CBRE today announced a commercial property on 355 Spencer Street was sold to funds management company Avari Capital Partners for $38.5 million, up from a purchase price of $27.2 million five years ago.

The sale is the second of a three-property portfolio held by developer Frank Palazzo, Resimax Group director Ozzie Kheir, and Probuild founder Phil Mehrten.

Last week the same vendors sold the first of these properties on102-108 Jeffcott Street to a prominent Melbourne developer for $9.5 million.

The Spencer Street property comprises a six-level 7,362sqm building on a prominent 2,000sqm corner site.

"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," says AVARI founder and chief investment officer Alan Liao.

"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."

CBRE's director of investments, Mark Wizel, who managed the sale with Josh Rutman, Lewis Tong and Scott Orchard, says the outcome has 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," says Wizel.

"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."

The Jeffcott Street property sold last week, which is a converted 1,838sqm warehouse on a 920sqm site, is expected to make way for a high-density apartment development according to CBRE.

Wizel and his team have sold seven properties in the last three weeks including 583 Ferntree Gully Road, Glen Waverley ($23 million), Woolworths Keysborough ($33 million),102 Jeffcott St, and 355 Spencer Street.

"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," says Wizel.

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