Qld group gets physical, pays $20m for Virgin Active site

A Queensland syndicate has snapped up Virgin Active's Bourke Street fitness premises in Melbourne for $20 million.

The deal marks a milestone for vendor Drapac Group, which has quietly offloaded the bulk of its Australian assets over the past five years as it concentrates on the recovering US land and development market.

Group founder Michael Drapac said the 4800-square-metre property at 138 Bourke Street, leased to Virgin Active until 2024 for a net $1,710,000 annual income, was one of Drapac's "last remaining Australian assets".

"We've been selling down progressively since 2008," he said.

The two-level strata property was bought by Sentinel Property Group on an 8.5 per cent yield, said CBRE's Justin Dowers, who handled the sale with colleagues Mark Wizel and Josh Rutman.

"The undersupply of more traditional retail investment assets such as neighbourhood shopping centres is seeing these buyers look outside the square for secure income-producing assets," Mr Dowers said.

Last month Drapac divested itself of the Environment Protection Authority's head office at 200 Victoria Street, Carlton, one of Melbourne's greenest office buildings, for $33.55 million.

A few months ago it announced a successful capital raising for its two US property funds, Stars & Stripes I and II. One fund will focus on income-producing inner-city development sites with potential for residential development. The other will target raw or partially developed residential land plots.

Mr Drapac said the funds were based on a medium-term strategy designed to take advantage of a broad-based recovery in the development market.

In the US developers had been starved by the GFC-inspired credit squeeze which, in turn, had created a large pent-up demand for land with development potential, he said.

"What we're exploiting is a return of the property land development industry." Drapac was now considering launching a third US fund next March, he said.

Drapac's remaining assets in Melbourne include the ground floor lease in the Georges Building at 162 Collins Street, some land in the northern suburbs and half a dozen office units at 138 Bourke Street.