Parliament Square Hobart hits the market with $300m plus expectations
More than $300 million is being asked for the ambitious Parliament Square mixed-used development in Hobart, which has been put on the market by Melbourne power couple Carol and Alan Schwartz.
Directly connected to the Parliament of Tasmania, the 7700sq m site covers most of a city block in central Hobart and includes two office buildings, a five-star hotel and retail.
It has been developed over the past seven years by Trawalla Group, the family office of the Schwartz family, in conjunction with Citta Property Group and Qualitas.
One of the office buildings was finished in 2017 while the other is due for completion later this year. Both have long-term leases with the Tasmanian government.
The Tasman Hotel, which will be managed by Marriott and become part of its Luxury Collection, was originally due to open in March.
But construction delays related to COVID-19, including issues with shipment of materials, means that has been pushed back to October.
Mark Granter from CBRE is marketing the development through an expressions of interest campaign and believes it will be the biggest commercial property sale in Tasmanian history.
Attractive to foreign buyers
“It’s a big property and I’m not aware of anything else that would come close – it would be the biggest sale for sure,” he said.
Mr Granter expects foreign buyers – who have been prominent in many of the year’s major office deals – will be attracted by the Tasmanian government leases.
The completed office building has 16 years left on its lease while the podium workplace has a 20-year lease. Combined they offer 17,300sq m of lettable space.
“Foreign capital love secure long-term government leases, so I think that will be the main source of capital together with local groups,” Mr Granter said.
“Long WALE government leases with fixed increases are really attractive because they are giving a good yield relative to where borrowing costs and interest rates are.
“We’re quoting just in excess of $300 million and are aiming for a capitalisation rate in the mid- to high 4 per cent range, based on the office income.”
The Tasman Hotel has 152 rooms and will not start generating income until it is open and operating. Under the 15-year management agreement, Marriott International will take a percentage of revenue.
When it finally does start trading, The Tasman will be the fourth new hotel to open in Hobart since July last year.
The arrival of the Vibe, Movenpick and Crowne Plaza had already added almost 600 rooms to the city’s hotel inventory, creating a crowded market and putting pressure on room rates.
However, tourism has been performing well, with Premier Peter Gutwein recently announcing that visitor spending increased 29 per cent in the March quarter compared with the same period in 2019.
