Mapletree Sells Melbourne Office Block for One-Third Off 2017 Acquisition Price

Mapletree Investments has contributed to a growing list of bargain Australian office deals with the Singapore firm reportedly having sold 417 St Kilda Road in Melbourne to a local retail magnate for over A$90 million ($59.5 million).

At the reported value the deal would represent a more than one-third mark-down from the A$145 million which the unit of state-owned Temasek Holdings is said to have paid to acquire the 10-storey building in 2017.

The cut-rate office sale, which was reported by the Australian, comes as Mapletree has been marketing its MASCOT office portfolio after raising A$654 million in equity for what it described at the time as an A$1.4 billion portfolio. Reports of Mapletree marketing its set of Australian offices first emerged in March of this year.

The deal comes as Mapletree was facing the end of a seven year term for its MASCOT Trust, a fund under its management which had acquired a portfolio of 10 office properties assembled by the firm during happier times for Aussie offices. 

Time Runs Out on Office Bet

Mapletree sold the property abutting Fawkner Park to Solomon Lew, chairman of apparel retailer Premier Investments, which has its offices in the freehold building. Inquiries to Mapletree Investments remained unanswered at the time of publication. At the reported valuation, Mapletree would be disposing of the asset for around A$4,458.98 per square metre.

The deal is reported as Melbourne’s office market continues to struggle with Cushman & Wakefield finding that vacancy for grade A offices in the city’s central business district rose to 18.5 percent in the second quarter from 17.3 percent a year earlier. 

The state-backed investment manager had acquired the 20,184 square metre (217, 259 square foot) property from a private trust managed by Newmark Capital in August 2017 in a bet on Australian economic growth and the future health of the country’s office market. The price was reported at the time as having been the highest ever paid for a building on St Kilda Road.

The Singaporean giant had been targetting a 12 percent internal rate of return on the MASCOT trust, which acquired 10 grade A office assets across Sydney, Melbourne, Adelaide, Brisbane and Perth from Mapletree’s balance sheet in 2019.

Mapletree is also said to be in talks to sell 78 Waterloo Road in Sydney’s Macquarie Park area to local fund manager Growthpoint Properties. Mapletree had paid A$106 million to acquire that seven-storey office block from Corval in 2015, per local media accounts.

MASCOT had a term of five years with provision for two, one-year extensions, Mapletree said in announcing the fund seven years ago, with the venture having attracted backing from pension funds, insurance companies, regional banks and corporates as well as high net worth and family office investors.

Aussie Office Bargains

Mapletree’s cut-rate disposal on St Kilda Road comes after its compatriots from Frasers Logistics and Commercial Trust agreed in July to sell 357 Collins Street in Melbourne’s central business district for A$192.1 million, with that deal representing a nearly 14 percent discount to the 2015 acquisition price. 

Also in July Hui Wing Mau, founder of China’s Shimao Group, sold 175 Liverpool Street in Sydney to Lendlease after paying over A$390 million to acquire the office building in 2014. 

In August Asian private equity firm PAG agreed to buy the Flinders Gate office complex in central Melbourne from Dexus for A$254.5 million.