One of Melbourne's greenest office buildings has changed hands for $33.55 million.
The Environment Protection Authority's head office at 200 Victoria Street in Carlton has been sold by its owner, Drapac, to a newly founded property player, the Impact Investment Group.
Since its inception at the start of this year IIG has acquired four properties, ranging from office, retail, industrial to medical assets with a combined value of $55 million, founder and chief executive Chris Lock said.
The seven-level EPA office was built in the 1970s but had an extensive internal refurbishment in 2008 that gave it a six-star green rating. Green buildings have proved to be popular assets. Private developer Grocon this year sold its ultra-green, four-storey Pixel building, also in Carlton, for $6 million, getting it a positive commercial return.
The 7000-square-metre Victoria Street building was IIG's first office asset, Mr Lock said.
IIG was started as a joint venture with Small Giants, a social enterprise business run by Danny Almagor and Berry Liberman - a member of one of Australia's richest families.
The EPA's lease covers five floors in the building and has about eight years to run, the remaining two floors were empty. The $33.55 million price tag equates to a fully leased yield of 8.7 per cent or 6.5 per cent on current net passing income.
Mr Lock said he was confident of finding another tenant for the empty floors despite the soft office leasing market and high levels of incentives.
IIG was targeting assets with a positive social and environmental impact that delivered strong returns, he said. It had a strong balance sheet to fund opportunities and retained a 10 per cent share in all single-asset syndicates it developed.
The group had sounded out potential investors ahead of the deal and intended to syndicate about half of the value of 200 Victoria Street as a single-asset investment trust to sophisticated private and wholesale investors. About half of those who invested did so via self-managed super funds.
"It was received extremely well, which is why we went unconditional so quickly," he said.
IIG forecasts returns of approximately 11 per cent per annum and significant tax deferral shielding.
Several other city office buildings of comparable value, 456 Lonsdale Street, 383 King Street and 420 St Kilda Road, are up for grabs as vendors seek to take advantage of low interest rates and the rising tide of offshore capital flowing into the country.