Marc Pallisco Domaine Cleans House In Its St Kilda Road Domain

The Age

Saturday September 30, 2006

Marc Pallisco

DOMAINE Property Funds Management is selling its only St Kilda Road asset, five years after it was purchased for one of its syndicates. Agents say Clemenger BBDO House at 474 St Kilda Road could reap more than $30 million for the Domaine St Kilda Fund syndicate - $10 million more than the $20.3 million it paid for the building in 2000.

During the unusually long 12-month settlement negotiated by Domaine, vacancy levels in St Kilda Road fell from 9.3 to 4.8 per cent. The precinct's vacancy is now closer to 10 per cent but this is not expected to deter investors.

Mirvac will be the biggest winner in the sale, having acquired a 50 per cent stake in the Domaine St Kilda Fund when it took over the James Fielding Group in late 2004.

The five-storey building was built by Grollo in 1983 and has been fully leased. It has a net lettable area of almost 4600 square metres and an adjoining seven-level car park of 575 bays - one of the biggest in the boulevard.

Unlike other properties sold locally in the past 12 months, Clemenger House is expected to arouse interest from both residential and commercial developers.

Chris Curtain of Lemon Baxter is reported to be behind the deal, but declined to comment when contacted by Capital Gain.

Meanwhile, private investor Henkell Brothers has listed an office building at 493 St Kilda Road, in a campaign by CB Richard Ellis and Gross Waddell.

Henkell Brothers, which picked up the building for $11.2 million in March 2002, can expect to reap about $17 million in the current market, says selling agent Michael Gross of Gross Waddell.

Home found for job finder

Meanwhile, Mirvac's other St Kilda Road asset - its headquarters at 380 St Kilda Road - may at last be making room for a new tenant. Online employment advertiser seek.com.au is understood to have decided to make the property its new digs, months after it started hunting.

Sources say Seek is formalising details to lease about 5000 square metres of space, having outgrown its existing offices in Wellington Street, St Kilda.

Mirvac has been seeking a tenant to fill more than 9000 square metres of vacant space in the building for most of the year. This includes space vacated by Zinifex, which is committed to pay rent until April 2007, despite already vacating.

Leasing agent CBRE was marketing space in the property for about $250 per square metre.

Representatives from Mirvac and Seek declined to comment.

GPT fills ASX void

The former Australian Stock Exchange building at 530 Collins Street is almost fully leased again, with owner the General Property Trust finalising more than 15,000 square metres of new leases in the past six months.

The Port of Melbourne Corporation will relocate from the Rialto, taking 3520 square metres of podium space on level four, and the Trust Company of Australia will move from Carlton, committing to 2040 square metres on level three - also a podium. Both tenants plan to relocate early next year.

According to one agent, the podium levels of 530 Collins Street, at about 3520 square metres per floor, are among the biggest premium-grade office floors available in the CBD, surpassed only by 161 Collins Street, home of KPMG.

"The ability to consolidate the corporation into one location and on one single floor will improve our organisational culture and improve the interactions of operations," Port of Melbourne executive general manager John Johnson says.

As reported in Capital Gain in May, St George has also committed to the building, taking more than 10,500 square metres of podium-level space for 10 years. Smaller tenancies include recruitment firms Opie & Gough and Sinclair Consulting.

Jones Lang LaSalle national leasing director Stuart Colquhoun says the recent leasing activity is pleasing and there is solid interest in the remaining vacancies.

530 Collins makeover

Proving it can pick itself up off the floor after being dumped by its biggest tenant the ANZ, GPT has also announced a makeover for ground levels of the 38-storey office tower.

Plans include an additional 2000 square metres of ground-floor retail space, new entrances and a proposal to improve the building's Australian Building Greenhouse Rating from 2.5 to 4 stars.

"The redevelopment will enhance the building's position as an attractive, pre-eminent business location," says Martin Ritchie, fund manager for GPT Wholesale Office Fund.

The works are expected to start in mid-2007 and be completed by mid-2008. ANZ is expected to vacate about 30,000 square metres by 2009.

More medical centres sold

The health of Melbourne's medical-based office market just gets better, with another $4 million in suite sales announced yesterday, this time in Box Hill.

The sales were at the Elgar Hill Private Consulting Suites, adjacent to the Box Hill Public Hospital and near the Epworth Eastern Private Hospital. Director of Apelbaum & Co, Phillip Apelbaum, says they were sold to a mix of owner-occupiers and investors.

This follows $28 million in sales at 100 Victoria Parade in East Melbourne, also by medical property specialist Apelbaum & Co.

Mr Apelbaum says the stability afforded by many medical occupants, who are not noted for readily moving their practices, keeps the market bullet-proof.

He says recent lettings of close to $500 per square metre in Box Hill have given investors returns of more than 7 per cent. This compares with residential and retail property alternatives, which typically return 4-5 per cent.

Following in the footsteps of the Austin Hospital, the Victorian Government is planning a redevelopment of the Box Hill hospital, built in the 1950s.

Set for a tidy return

After weeks of speculation, the refurbished Recruitment Super House at 179 Queen Street is being prepared for the market.

The 8700-square-metre, 12-level office building is expected to reap more than $25 million for investor Clement Lee, who may now see the upside of failed sale attempts in April 1997 and May 1999, when the investment market was weaker.

Mr Lee paid $7.1 million for the property in 1995 and carried out a refurbishment in 1998. Tenants in the building include Canon, Recruitment Super and Primary Superannuation Services.

"We expect strong interest from institutional and non-institutional investors, as the property is in a price bracket that will appeal to both," says DTZ managing director Andrew Stern, who is selling the building with Knight Frank's Clinton Baxter.

Mr Baxter describes it as a "a very sound property, inside and out, with a strong tenancy profile and, most importantly, excellent room for rental growth".

capitalgain@theage.com.au

© 2006 The Age

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