A $581 MILLION office portfolio sale that includes The Age's home, Media House, is at the centre of a new strategic alliance between Grocon and Colonial First State Property.
Grocon has sold three Melbourne A-grade office buildings Media House at 655 Collins Street, 50 per cent of the QV building in Lonsdale Street, and the AXA centre in Docklands to Colonial, manager of the Commonwealth Property Office Fund (CPA).
The AXA sale is subject to approval by unit holders in Grocon Property Trust Australia.
Under an ongoing fee rebate arrangement, Grocon will receive a proportion of the base fund management fees from the assets.
Grocon chief executive Daniel Grollo said the sale of its mature assets would open up more capital for development work, "which is what we want to do". "It will keep the construction company active working for our development business and is a step forward around funds management," he told BusinessDay.
"Colonial . . . is a top funds manager, and I'm sure there's lots we are going to learn from them. It's a real win for us, and they are buying some great assets from us, new and sustainable. It's a question of where we take the relationship from here. Both organisations can create some real value if we make it work right."
Mr Grollo said it had been tempting to go it alone. "We could have done it ourselves, but the organic thing was a lot slower for us and not as creative, and would not have given us as much future opportunities," he said.
The CUB site in Melbourne is Grocon's big development. "The length of time to complete that is up to the market," Mr Grollo said. "We will do something with 161 Castleraigh in Sydney at some point."
Under the alliance, Grocon may tender for Colonial projects. Grocon will also have exclusive negotiation rights to develop Colonial's "Money-Box" building at 5 Martin Place in Sydney's CBD, a heritage building dating from 1916.
CPA will buy the Melbourne portfolio for $581.4 million, excluding stamp duty and other costs. This amounts to a 3.3 per cent discount to an independent valuation done on November 1.
Darren Steinberg, managing director of property at Colonial First State Global Asset Management, said all the assets were less than seven years old, had 99.7 per cent occupancy, low capital expenditure requirements and strong expected total returns.
Frequently Asked Questions about this Article…
What exactly did Grocon sell to Colonial First State in the Melbourne office portfolio deal?
Grocon sold three Melbourne A‑grade office buildings to Colonial First State (manager of the Commonwealth Property Office Fund): Media House at 655 Collins Street, a 50% stake in the QV building on Lonsdale Street, and the AXA Centre in Docklands.
How much did Colonial (CPA) pay for the Melbourne office portfolio and was the price in line with valuation?
The Commonwealth Property Office Fund (CPA) is buying the Melbourne portfolio for $581.4 million, excluding stamp duty and other costs. That price represents a 3.3% discount to an independent valuation completed on November 1.
Is the AXA Centre sale to Colonial subject to any approvals?
Yes. The AXA Centre sale is subject to approval by unit holders in Grocon Property Trust Australia, as noted in the transaction details.
What is the fee rebate arrangement between Grocon and Colonial and how does it affect Grocon's income?
Under an ongoing fee rebate arrangement, Grocon will receive a proportion of the base fund management fees from the assets sold. This means Grocon will continue to earn management-related income even after the sale.
What does the strategic alliance between Grocon and Colonial First State mean for future development and contracting opportunities?
Under the alliance Grocon may tender for Colonial projects and has exclusive negotiation rights to develop Colonial's 'Money‑Box' heritage building at 5 Martin Place in Sydney. The partnership also opens up broader funds‑management and development collaboration possibilities.
Why did Grocon decide to sell these mature office assets instead of keeping them?
Grocon chief executive Daniel Grollo said selling mature assets frees up capital for development work, keeps the construction business active on development projects, and accelerates funds‑management opportunities that would have been slower if Grocon had gone it alone.
What did Colonial say about the quality and performance of the Melbourne assets it is buying?
Darren Steinberg of Colonial First State Global Asset Management said all the assets are less than seven years old, have 99.7% occupancy, require low capital expenditure, and are expected to deliver strong total returns.
Are any specific Grocon development sites mentioned that relate to this deal or future activity?
Yes. The article mentions Grocon's big development on the CUB site in Melbourne and that Grocon plans to do something with 161 Castlereagh in Sydney 'at some point,' indicating ongoing development activity alongside the alliance with Colonial.
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