Transaction analysis from acquisition to disposal

Acquisition Disposal
Purchase Price $40.0 million $57.5 million
Sale Date Mar-16 Jan-18
Net Income p.a. $2,812,000 $3,378,232
NLA Rate $4,626/m² $6,650/m²
Site Rate $17,223/m² $25,762/m²
Net Yield 7.03% 5.87%
Past performance is not an indicator of future performance.

Overview

606 St Kilda Road, Melbourne is an attractive building re-built and extended in 2003 to provide 10 levels of office accommodation, ground floor and basement parking and an on-site cafe offering total net lettable area of 8,647m2 and 141 car spaces.

We identified it as a quality St Kilda Road office building with sound fundamentals and ideal scope for rental appreciation and capital growth via hands on management and leasing.


Background and Opportunity

Bayley Stuart Capital had been extensively researching several office markets for investment opportunities and concluded the St Kilda Road office precinct offered the best fundamentals for capital growth via rental reversion due to its continuing trend of office withdrawals for residential conversion despite remaining a popular corporate location.

606 St Kilda Road was appealing as its floors split efficiently meaning it catered to tenants of all sizes from 83m2 up to whole floors of 880m2 and offered good natural light, however was in need of aesthetic upgrades and an energetic management and leasing approach.

BSC acquired the asset in March 2016 and with minimal expenditure promptly repositioned the building via cosmetic modernisations to the lobby and lifts. Key achievemnents in less than two years of ownership included:

  • Entered into 22 leases
  • Maintained 100% occupancy throughout ownership
  • Increased net income by more than 20%
  • Generated strong cashflows with incentives well below market rates
  • Significantly enhanced the assets brand and tenancy profile

This transaction demonstrated BSC’s ability to identify and secure an appropriate asset within a target market, set and implement a strategy, and achieve an outstanding outcome in a short timeframe.


Project Strategy

Enhance income profile and in turn asset value via asset re-positioning, intensive leasing and management strategy.


Target IRR

12.00% p.a.


IRR Achieved

28.12% p.a. (22 month project timeframe)