EG Funds buys for future cycle
Walker Corporation has offloaded a site in Fortitude Valley for $27.7M to EG Funds Management.
Walkers previously obtained a DA on the 3,582sqm site at 801 Ann Street for a 433 apartments or a 26 level 44,000sqm office building, which was likely put together to pursue Origin energy.
The proposed commercial tower featured large floor plates of up to 2,132 sqm per level in the highrise section, an extensive ground level lobby with cafe and retail facilities along McLachlan Street. Storage for 350 bikes as well as 506 lockers is planned within the proposed end of trip facilities on basement level one.
Large floor plate buildings are attractive to large tenants however there are few tenants of significant scale who would seek to position themselves in this market.
This precinct has seen the greatest activity amongst the fringe markets with WSP Brinkerhoff relocating from the CBD into 5,685sqm of sub-lease space at 900 Ann St and DXC to consolidate from a number of locations into 4,700sqm at 100 Brookes St being the two largest relocations into the precinct. Additionally Macquarie Bank has expanded and resigned over 4,301sqm at 825 Ann St. The Urban Renewal precinct (which includes Fortitude Valley & Newstead) recorded positive absorption of 17,612sqm in H1 2018, taking the overall vacancy to 13.7%.
The precinct also has considerable new supply of commercial space with over 230,000sqm of approved commercial space across 8 projects all competing with the CBD for major tenant pre-commitments.
Walker Corp paid $22m for the site on a 3 year delayed settlement from AP Eagers and has effectively flipped the deal to EG at or around the time of their settlement, pocketing a gain of $5.5M (before transaction costs, & DA costs).
The Ann Street site is currently occupied by a Volvo dealership with a lease expiry of 5 years generating a net yield of 4.7%. The property will be acquired for EG's Yield Plus Infrastructure No.2 fund which was launched in August 2016 and is the eighth asset in the fund which has now acquired approximately $330 million of FUM. The fund strategy is to acquire yield producing real estate with repositioning potential, near new or upgraded infrastructure.
The site remains an attractive re-development site if positioned correctly for the market.
The sale was negotiated by JLL.