Singapore-listed Frasers Centrepoint, controlled by Thai tycoon Charoen Sirivadhanabhakdi, has carved a Melbourne office tower out of Australand’s $3 billion commercial property trust and sold it into a listed real estate investment trust it manages.
The company, which acquired Australand last year via a $2.6bn takeover, yesterday unveiled a deal to sell 357 Collins Street to its affiliated Frasers Commercial Trust (FCOT) for $222.5 million.
The conditional sale and purchase agreement is the first time part of the Australand portfolio has been peeled off into a Frasers-run trust. It is the largest office sale to be struck in Melbourne this year and represents the Singapore vehicle’s entry into the city.
The chief executive of the fund manager, Low Chee Wah, noted the significance of FCOT’s entry into the Melbourne CBD market, the second largest in Australia.
“This will complement and diversify FCOT’s exposure from its existing portfolio in Perth and Canberra in Australia,” he said. “With Collins Street being regarded as a prime office location in the Melbourne CBD, good connectivity and Grade A specifications of the property, 357 Collins Street is set to be a strategic addition to FCOT’s portfolio.”
Mr Low said the acquisition would lift FCOT’s portfolio size by 14.2 per cent to $S2bn ($1.92bn) and is expected to lift distributions per unit for investors.
Frasers Centrepoint is separately advancing plans to set up a Singapore industrial fund, consisting of stabilised Australian industrial property assets.
Frasers Centrepoint chief executive Lim Ee Seng flagged the plan last November, saying then that the group could shift some of the Australand properties into Singapore REITs.
The timing could depend on Australand’s expected exit from its $450m logistics venture with GIC, which is selling out of all its Australian industrial holdings.
Frasers and Australand have declined to comment on the plan but creating a fourth REIT for industrial assets is part of planning for the Australian business.
Situated in the heart of Melbourne, 357 Collins Street is a 25 storey A-Grade office tower that spans a total net leaseable area of 31,920sq m. This comprises office space of 30,095sq m and 1825sq m of retailing.
The tower has a roster of quality tenants, including Commonwealth Bank, Meridian Lawyers and Wilson HTM. It has an occupancy rate of 95.5 per cent and a long-weighted average lease expiry by income of six years.
Most floor plates are greater than 1000sq m.
The price was in line with valuations of $227m by JLL and $224m by Knight Frank.
The Melbourne purchase will be financed through a mix of debt and equity.
This article first appeared in The Australian Business Review.