Frasers REIT Selling Melbourne Office Tower for $124M in Industrial Pivot

Frasers Logistics and Commercial Trust has agreed to sell a Melbourne office tower for A$192.1 million ($124 million) as the Singapore-listed REIT turns its focus to industrial assets.

The 25-storey 357 Collins Street is changing hands at a mere 0.6 percent premium to the property’s independent valuation, which has stayed flat at A$191 million since last September amid challenging market conditions in Melbourne’s central business district, FLCT’s manager said Wednesday in a release.

The consideration is net of tenant lease incentive liabilities that will be transferred to the buyer, who is reported to be Harry Stamoulis, a soft drinks heir and property tycoon. The proceeds from the disposal will provide FLCT with financial flexibility for its new strategic direction, according to the manager.

“The divestment of 357 Collins Street represents another strategic step in our ongoing portfolio reconstitution, which allows us to extract value from a commercial property and re-weight our portfolio towards logistics and industrial properties,” said Anthea Lee, CEO of the manager.

Remote Work Woes

FLCT, then known as Frasers Commercial Trust before its merger with Frasers Logistics & Industrial Trust, acquired 357 Collins Street in 2015 for A$222.5 million.

The 1967-vintage tower provides 31,780 square metres (342,077 square feet) of lettable area, valuing the asset at A$6,045 ($3,905) per square metre at the agreed price.

The sale lets FLCT exit a Melbourne CBD office market that continues to suffer from remote work culture and an elevated vacancy level of 18.6 percent, the trust’s manager said, citing JLL data. Upon completion of the deal by the end of September, the REIT’s portfolio weighting towards industrial is expected to rise from 72.4 percent to 74.2 percent.

“The proposed divestment will also enhance FLCT’s portfolio metrics, with a higher overall portfolio occupancy rate of 95.2 percent and a longer weighted average lease expiry profile of 4.8 years, from 93.9 percent and 4.6 years respectively, prior to the divestment,” the manager said.

The book value of 357 Collins Street represents 9 percent of FLCT’s S$1.9 billion commercial portfolio, comprising four properties in Australia, three in Britain and one in Singapore. The bulk of the trust’s overall portfolio consists of 106 industrial assets, mostly in Australia and Europe, valued at S$4.9 billion. FLCT reported a total occupancy rate of 94.3 percent at the end of 2024.

Sponsor Stabilises

FLCT sponsor Frasers Property, the SGX-listed firm majority-owned by Thai alcohol tycoon Charoen Sirivadhanabhakdi, has sought to raise cash and pay down debt after its net gearing reached 86.4 percent at the end of 2024.

In April, Frasers Property announced its sale to Morgan Stanley of a half-stake in an eight-asset Australia industrial portfolio developed by the firm and valued at A$600 million ($380 million).

A month earlier, a vehicle jointly held by Frasers Property, Charoen and the estate of the Thai billionaire’s late wife agreed to sell its half-stake in a northern Singapore mall complex to the sponsored Frasers Centrepoint Trust for S$1.17 billion ($880 million).