A subsidiary of the Tokyo-based Nippon Telegraph and Telephone Corporation purchased a $72 million Melbourne office tower from Australian Unity boosting commercial real estate in the midst of Covid-19.
The 200 Victoria Street, Carlton building has more than doubled in price since 2013, and was valued at $59 million in October 2019.
The property was purchased by Australian Unity in 2014 for $42.3 million and for $33.6 million by Impact Investment Group in 2013.
The latest NTT Urban Development Corporation acquisition represented an initial yield 4.92 per cent and a capital value of $9,100 per square metre.
The property is comprised of high quality modern A-grade office tower 67 per cent leased to the state government on behalf of the Environmental Protection Authority Victoria and 29 per cent leased to Trinity College, Melbourne University’s oldest college.
Colliers head of capital markets in Melbourne Trent Preece said the terms of the sale were agreed to in late 2019 but the purchaser needed foreign investment review board approval to complete the sale.
“The sale of 200 Victoria Street is an outstanding result for both vendor and purchaser during challenging economic conditions,” Preece said.
“It [the price] was a combination of the market continuing to tighten in the second half of last year and a conservative valuation.
“There’s a lot of opportunity on the site.
“It has a planning permit that Australian Unity achieved but they’re not looking at that in the short-medium term.”
Colliers brokered the off-market transaction to Sydney-based investment manager Realmont Property Partners on behalf of 200 VS Pty Ltd, which is effectively owned by Japanese domiciled NTT Urban Development Corporation—a subsidiary of the Fortune 500 company.
NTT Urban Development Corporation obtained the 100 per cent freehold equity interest though its Australian subsidiary, UD Australia Pty Ltd.
“In accordance with our investment strategy, UD Australia Pty Ltd will continue to expand its pipeline over the medium to long term to further strengthen its business portfolio,” the company said.
“The northern precinct of the Melbourne CBD is designated as a special innovation zone called the Melbourne innovation district, which is planned to grow as an innovative hub for medical and educational institutions and relative start-up businesses, and we expect the building should attract tenants within those sectors.”
The 200 Victoria Street office tower was built in 1971, has seven above ground floors, 7,912sq m lettable area and underwent major renovations in 2009.
It is one of the most sustainable buildings in Melbourne, one of only three to achieve a 6.0 Star Green Star rating and 5.5 Star NABERS Energy rating 1.
Australian Unity diversified property fund told investors they were pleased with the sale which was an $11.2 million increase in the building’s previous valuation.
Australian Unity stated they would make a “special distribution” in addition to the regular income distribution in June.
“The sale price was at a premium of approximately 20 per cent above the latest book value of the property,” Australian Unity stated.
“The sale reduces the overall leasing risk profile of the fund, increasing its weighted average lease expiry to 7.7 years from 7.1 years before the sale.
“The sale outcome, in the face of a market downturn is a testament to the quality of the fund’s assets and an example of our ability to deliver value for investors over the long term.”
The location will capitalise on the Metro Metro rail project, including the future state library and Parkville stations and direct underground pedestrian link to Melbourne Central station, the rapidly growing Melbourne biomedical precinct and central position between Melbourne University and RMIT.
The acquisition is NTT’s second major commercial investment in Australia having purchased a 50 per cent interest in 121 Marcus Clarke Street, Canberra for $100 million in March 2019 also through Realmont Property Partners.