Bourke Street freehold sells on 2.6 per cent yield
A small building on Melbourne’s Bourke Street that will soon make way for a new bar and restaurant concept by hospitality operator Eddie Muto has changed hands for $22.5 million on a yield of just 2.6 per cent.
The freestanding two-level building at 384 Bourke Street, currently occupied by OPSM and just around the corner from popular dining laneway Hardware Lane, was picked up by a local investor in a sign of strong demand for CBD assets heading into 2020.
It was sold by investor M & M Assets (controlled by Bak Hoe Goh and Bee Hoon and Yok Yeong Loh) who paid $15 million for the shop in 2015 – a deal that reflected a 3.1 per cent yield.
In December, M & M Assets negotiated a new 10-year lease paying $586,275 a year.
Title deeds show the lease is to Lola Restaurant & Bar, a company owned and directed by Mr Muto, whose Barman & Larder group has launched numerous Melbourne restaurants and hospitality venues including Left Bank on South Bank, Henry & the Fox, Meat Market and Common Man.
The sale of 384 Bourke Street was handled by Mark Wizel, Julian White, Chao Zhang and Nathan Mufale from CBRE.
The agents said the sale represented a 50 per cent increase on the previous 2015 purchase price and a big uplift in building and land rates compared with recent sales nearby.
The 1047sq m building, which has only 10 metres frontage to Bourke Street, sold at a building rate of $21,482 per sq m and a land rate of $47,771 per sq m.
Investor confidence
By comparison, properties at 418-422 Bourke Street offered by the estate of art dealer Julian Sterling sold in late 2019 at a building rate of $17,053 per square metre and a land rate of $32,283 per square metre.
The two properties – a four-storey brick building and a two-storey building – sold for $5.6 million on a yield of 2.8 per cent through Colliers International and Lane Commercial.
“The result for 384 Bourke Street is very telling, demonstrating the current investor confidence in Melbourne CBD investments,” Mr White said.
“The compressed yield highlights that investors are banking on further interest rate cuts to create a greater yield spread between rentals and acquisition costs.
“Investors are also hunting for trophy assets and are less fazed by immediate rental returns, given the CBD’s strong underlying market fundamentals.”
CBRE said it had fielded 10 offers with a strong mix of local and Asian-backed investors.
“While the buyer has other property holdings here in Melbourne, there was strong bidding from groups that have yet to buy here before,” Mr Zhang said.
