Cbus Property has acquired Melbourne’s most prized CBD development opportunity, a mid-city island site with prospects for a $1 billion project.
Cbus Property has exchanged contracts with Industry Superannuation Property Trust on 447 Collins Street, known as the Suncorp building, under a $91 million structured transaction.
Significantly, the deal gives ISPT first right of refusal to buy back into the opportunity at a later date, through a fund-through or take-out arrangement.
“The acquisition of 447 Collins Street reflects our strategic commitment to development in Australia and in particular the Melbourne market,” Cbus Property boss Adrian Pozzo said.
Noting Cbus’s recent completion of the new BHP Billiton headquarters at 171 Collins Street, Mr Pozzo said the prominent Suncorp site on the William Street corner would become “a new premium landmark building”.
“The future development will provide in excess of 5000 jobs over five years, many of whom will be members of the Cbus superannuation fund.”
A buzz of expectation has swirled around the 6000 sq m site for the past two years as it became clear ISPT was looking at redevelopment opportunities there.
In April, ISPT applied for a demolition permit for 1960s era building as the anchor tenant, Suncorp, prepared to leave. In June, it was among a handful of CBD buildings rejected by the state government for heritage protection.
ISPT chief executive Daryl Browning said the sale, to settle next month, was in line with the strategy for the $7.5 billion ISPT Core Fund’s of focusing on well-let investment property.
Participate in future development
“We also have the option to participate in future development of the property which could provide future investment stock,” he said.
“ISPT has considered a range of options for the site but ultimately decided a competitive sale process was in the best interest of unitholders.”
Early last year, ISPT began a costly renovation of the building’s facade after a chunk of marble sheared off from the exterior into the forecourt below.
Some regard the 27-level building as a prime example of post-war International style. Others rate it as a bland piece of corporate real estate with little heritage value.
Town Hall has asked for more information on the staging of the proposed demolition before granting a permit. One objection has been received from the Melbourne Heritage Action Group.
The vast site could accommodate between 60,000 to 80,000 square metres of developed space, including commercial office and some retail. A hotel or even a residential component could be considered in one or more buildings on the site.
One market observer, not involved in the deal, described the property as the “best CBD site in Australia”.
A mixed-use project could have an end value of between $700 million and $1 billion, adding to a $3 billion wave of development already working its way along Melbourne’s premier business address.
“The opportunity of creating a truly world class development in the heart of the Melbourne CBD is very exciting,” Mr Pozzo said. “The development team are already in discussion with a number of prospective high-calibre tenants for the site .
“Concept design for the site will commence immediately with the brief to produce a vibrant and iconic precinct that optimises the local urban characteristics.”
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