Singapore-listed CapitaLand Investment (CLI) has bought a 22-storey office tower in the Melbourne CBD, marking its fifth investment in Australia within six months.
The 120 Spencer Street building comprised 32,000 sqm of net lettable area and was located opposite the Southern Cross train station.
The property was 97.5% occupied and had a weighted average lease expiry (WALE) of 6.7 years, with tenants such as WeWork, Central Queensland University and Redhill Education.
The asset was purchased for an undisclosed sum on behalf of CapitaLand’s regional core-plus fund, CapitaLand Open End Real Estate Fund (COREF) – growing its total investments to about US$900 million.
Paul Toussaint, Managing Director for Australia at CLI, said Australia was one of the company’s focus markets where they saw significant potential for growth.
“In view of the post-COVID recovery and companies’ steady return to work, we believe that the Australian office market is showing signs of growth that will overcome the near-term challenges of vacancy and tenant incentive levels,” Toussaint said.
“120 Spencer Street is well-positioned to capitalise on this given its strong WALE, vibrant location benefiting from the area’s rejuvenation, and potential for enhancements.”
Toussaint said CLI had invested about $1.5 billion in five quality assets in the country held through its private and listed funds over the past six months.
The 120 Spencer Street property has undergone $30 million worth of upgrades over the past five years, including the recent installation of energy-efficient mechanical and engineering equipment.
It had also received the NABERS Energy 4-Star and NABERS Water 5.5-Star certifications.
Simon Treacy, CEO of Private Equity Real Estate, Real Assets at CLI, said ESG principles were central to CLI’s investment process.
“The Australian office sector presents relative value, and our highly experienced local team has been able to capitalise on the window ahead of the post-COVID recovery to capture this opportunity,” Treacy said.
“With ESG principles central to our investment process, we will continue to actively enhance our portfolio of assets to generate quality returns for our stakeholders.”
Recent Melbourne office transactions include Growthpoint Properties’ purchase of a government-leased office building in Dandenong for $165 million last week.
Prior to that, Frasers Logistics & Commercial Trust bought an office building in Mount Waverley for $60.25 million, while Garda Property Group acquired an office in Hawthorn East for $20.1 million last month.
In February, Singapore-listed Straits Trading Company bought two office buildings in Docklands for $150 million, while Hong Kong-listed Link REIT entered into a $596 million deal with Oxford Properties to invest in an office portfolio including the 567 Collins Street building in the Melbourne CBD.
Across Australia, office deals reached $3.4 billion during the first quarter of 2022, down 18% on the same period a year ago, according to Real Capital Analytics.
However, office transactions reached $24.8 billion over the 12 months to end-March 2022, up 63% year-on-year.