85 Spring Street in Melbourne is likely to stay commercial for now
Australia-based Chinese developer Golden Age and partner US investment firm Starwood Capital have shelved plans for a A$600 million ($427 million) Melbourne apartment and hotel complex, and are reportedly selling the site to Proprium Capital Partners Australia amid a slowing housing market, according to an account by The Australian.
The deal may include the new owner repositioning existing commercial project on the site, rather than following through on Golden Age’s plan to redevelop the property for residential purposes, as sales of new apartments in Melbourne waver.
Another Chinese-backed developer, Woodlink, has also scrapped plans for a A$360 million ($257 million) residential development in an up-and-coming shopping, residential and dining district on Melbourne’s St. Kilda Road.
Woodlink had acquired the famed site of the Illoura House in late 2015 and less than one year ago filed plans to redevelop the land into a 163-apartment development. However, Woodline has recently instructed agents CBRE, which also arranged the reported sale of the Golden Age project, to market the property, which has already been approved for construction of an 18-storey building.
Slowing Condo Sales Force Change in Plans
Australia’s nationwide home values dropped one percent in January, led by a 1.3 percent decline in Sydney and a 1.6 percent slide in Melbourne, according to data released by property information provider CoreLogic Inc on February 1.
Melbourne’s Jeff Xu is rethinking redevelopment
The downturn in Sydney and Melbourne property values in January drove average home prices nationwide down to levels last seen in October 2016, amid tighter lending conditions and high levels of housing supply. Homes are also taking longer to sell, with total advertised stock levels almost 16 percent higher than last year, reported CoreLogic.
Golden Age Group, which previously developed Melbourne’s tallest residential building, Victoria One, and the world’s fourth slimmest building, Collins House, was founded by Shanghai native Jeff Xu in 2006.
Xu’s firm bought the 10,700 square metre (115,174 square foot) site at the corner of Spring Street and Little Collins in Melbourne’s CBD, for A$75 million ($53 million) in early 2017. The L-shaped property is considered one of central Melbourne’s most prominent projects and is currently occupied by a 16-storey 1980s-vintage office building which serves as the headquarters of Australian finance company Esanda.
Luxury Builder Backs Away From Redevelopment
Xu’s vision was to redevelop the site into an A$400 million, 39-level residential complex. The proposed project would comprise 138 apartments and include provisions for a A$200 million hotel fronting Little Collins street.
The Chinese developer, known for its luxury high-density developments in Melbourne and Sydney, formed a partnership with Starwood Capital in late 2017 with a plan to jointly manage the 250-room luxury hotel on the site.
However Golden Age’s initial confidence in Melbourne’s apartment market has been stifled over recent months as demand for new homes has softened, leading to the developer, with a combined value of A$4.2 billion worth projects spanning Australia’s eastern seaboard, opting to recycle funds for commercial assets.
In October last year Xu’s firm had sold a freestanding commercial building on Melbourne’s McKillop Street for A$14.5 million after abandoning plans to redevelop that property into a boutique office and retail development.
New Owners Likely to Stay Commercial
According to The Australian, the new owner of 85 Spring Street, Proprium Capital, is likely to readjust Golden Age’s vision. The private equity firm is expected to reposition the current building on the site with the hope of pulling in office tenants who have been forced to relocate from other nearby properties due to urban renewal projects.
Proprium Capital is an employee-owned real estate fund manager spun off from Morgan Stanley in March 2013. The private equity firm is focused on providing investment advisory services to commingled, discretionary funds with respect to opportunistic investments in real estate and real estate-related operating companies, according to its website.
With offices in the New York area, London, Hong Kong, Mumbai, Sydney and Atlanta, Proprium’s combined assets under management are approximately $2 billion. Proprium has advised funds with investments in 15 countries.
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