Felicia Tan Tue, Jun 07, 2022
CapitaLand Investment (CLI) has acquired a freehold office tower in the Western Core of Melbourne’s central business district (CBD) on June 7.
The tower is a 22-storey building at 120 Spencer Street, located opposite the Southern Cross Station. The station is a major hub that connects the city to the wider Melbourne region. The tower has a total net lettable area (NLA) of 32,000 sqm.
The building has a strong committed office occupancy of 97.5% and a long weighted average lease expiry (WALE) of 6.7 years. Its tenants include WeWork and prominent local educational institutions such as Central Queensland University and Redhill Education.
In the longer-term, the property is said to have a “strong embedded value” due to its prime island site with triple street frontages and a potential 22,000 sqm of unutilised gross floor area.
In addition, the property has undergone A$30 million ($29.7 million) worth of upgrading that includes the recent installation of energy-efficient mechanical and engineering equipment.
The acquisition is CLI’s fifth investment in Australia within the past six months.
The building was acquired for the property group’s flagship regional core-plus fund, CapitaLand Open End Real Estate Fund (COREF).
This is COREF’s first acquisition in Australia and its fourth in the Asia Pacific (APAC) region. The fund, which was established in August 2021, has made a total investment of around US$900 million ($1.24 billion) to date.
“Australia is one of CLI’s focus markets where we see significant potential for growth. CLI has invested about A$1.5 billion ($1.48 billion) in five quality assets in the country held through its private and listed funds in the past six months,” says Paul Toussaint, managing director for CLI’s Australia business.
“120 Spencer Street is CLI’s latest deal in Australia, sourced and executed by our experienced local team,” he adds. “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 believes that the new acquisition is “well-positioned” to capitalise on the post-Covid return to work and signs of growth in the Australian office market thanks to its strong WALE, vibrant location and potential for enhancements.
Simon Treacy, CEO of private equity real estate, real assets, CLI, says: “Leveraging CLI’s deep expertise and extensive network in the Asia Pacific, we continue to build up COREF’s portfolio with high quality assets across gateway cities in Japan, Singapore and now Australia.”
“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. CLI adopts a disciplined approach in pursuing assets that offer value to investors. 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,” he adds.
Kevin Chee, managing director, private funds, CLI, says: “COREF’s acquisitions are aligned with its focus on key investment themes of regionalisation/decentralisation, emerging locations, evolving workspace solutions, digital economy and sustainability. COREF’s entry into Australia is in line with its strategy of building geographic exposure to institutional grade, income-producing assets across developed markets in Asia Pacific early on before diversifying into other sectors.”
Shares in CLI closed flat at $3.89 on June 6.