Pelligra sets foot on Spring Street's forgotten trophy
Busy private developer Ross Pelligra has swooped on a prized Melbourne office block, across the street from state parliament, for around $130 million, in a big vote of confidence in the revival of the CBD market.
With its prime position on Spring Street, above a metro entrance at the upmarket east end of town, 85 Spring Street has been a graveyard of developers’ ambitions for almost a decade.
Its 16-storey office building has been shuttered as towering residential proposals by Grocon, then Golden Age failed to materialise. Its most recent owner was Anton Real Estate Partners, which is backed by US player Proprium Capital Partners.
Mr Pelligra is confident he can revive the fortunes of the 10,700-square-metre building through refurbishment rather than redevelopment, with around $300 million in total investment.
“We’re aiming to return it back to office use quickly and have tenants back in by early next year,” Mr Pelligra told The Australian Financial Review.
He said there was a lot of residential product being offered nearby, but not much new office stock. “If we build and refurbish, they will come,” he said.
He said his preference was to secure one big tenant, but that Pelligra would work with the “requirements out in the market”, including the option to let the building to multiple groups.
“We’ll undertake upgrades to the building, introduce good amenities, including end-of-trip facilities. It will have a new feel to it.”
Mr Pelligra said he had always wanted to own property on Spring Street. “85 Spring Street is a perfect intergenerational asset for us.”
After acquiring the property three years ago from Golden Age for $112 million, Anton took the property back to the market, complete with an updated approval for a 37-level office tower with about 30,000sq m of office accommodation, late last year.
CBRE’s Kiran Pillai, Scott McGlone, Mark Coster and Stuart McCann, together with Knight Frank’s Paul Kempton, Trent Preece and Ben Schubert, were appointed to broker the property.
The site attracted interest from Rich Lister residential developer Tim Gurner and fund manager Charter Hall before it was snapped up by Mr Pelligra, whose development platform controls an extensive portfolio of office, industrial, residential and hospitality assets in Victoria and South Australia.
Jeff Xu’s Golden Age gave up its ambitions for the trophy site in 2019 after the market swung sharply against CBD residential projects.
Two years before that, Golden Age had bought the site from Grocon for $75 million, after the well-known developer led by Daniel Grollo also failed to make a residential proposal work.
After weathering two years of rolling lockdowns, the Melbourne CBD is showing signs of life, albeit with an office vacancy rate above 11 per cent. Some CBD landlords have been hoping buildings with smaller floor plates will be easier to let up as small and medium businesses return to growth first.
Transactions have gathered pace as the office recovery beckons, with Charter Hall working on a $2.1 billion deal to acquire the Southern Cross towers on Bourke Street and Singapore’s CapitaLand buying a Spencer Street tower for $320 million.
