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Weekly Transaction Update - 12th April

This week we recorded 20 major transactions worth $596m

Far East lands Melbourne deal

The Far East Consortium acquired a 68-level apartment project in Melbourne in a $90 million deal from investor, Besgate Group.

The project, at 640 Bourke Street was acquired in 2013 by Besgate from Australia Post with a development permit in place for a 42-level 560 apartment complex for $23.9m ($42,678 per apartment). Besgate subsequent re-designed the tower and obtained approval for a further 26 levels accommodating 813 apartments.

At $90m, the purchase price now represents $110,701 per apartment site and is the same rate Meriton paid last week for Besgate's other divestment at 170 King Street.

Far East started investing in Australia in 1994 and was initially heavily concentrated in Melbourne with projects including Regency Towers, Flinders Wharf Apartments, Royal Domain Plaza, Royal Domain Tower, Northbank Place, Upper West Side, The Fifth and West Side Place. More recently, their national expansion over recent years has seen its portfolio include Queens Wharf Brisbane, The Star Residences Gold Coast, The Towers Elizabeth Quay Perth, Perth Hub and The Star Residences Sydney.

The latest acquisition in Melbourne sets up the group for the next development phase for the Melbourne market.

The off-market deal was brokered by Colliers.


Challenger offloads Another Asset

Challenger continues to exit some of its direct real estate assets with the sale of 31 Queen Street to US based AEW Group in a deal worth approx $200m.

31 Queen St is located on the corner of Flinders Lane within the Western Core financial precinct of the Melbourne CBD. The 1976, B Grade building comprises 27 levels of offices, ground floor retail and five levels of parking for 172 cars with a net lettable area of 19,213 sqm.

Challenger held the asset on their books at $164.5M in July 2018 based on a cap rate of 5.25%. The current sale at $200m was reported to have been based on a yield of circa 5%.

Challenger acquired the asset in 2011 for $81M on a equivalent yield of 8.1% and rode the compression in yield whilst generating solid returns. The sale comes after Challenger have sold several other assets over the past 12 months including The Barracks in Brisbane for $162M and 53 Albert St Brisbane for $250M. As at June 2018, Challenger held $2.6Bn in directly held assets in Australia with a further $741M held offshore.

The acquisition by AEW follows their acquisition of 19 Harris St Pyrmont in August last year for $143M at a sharp yield of 4.8%.

The sale to AEW was brokered by JLL.


EG 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 t