AFRGA1 A038

AFRThursday 11 February 2016The Australian Financial Review | www.afr.com

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38 Property =?

High hopes forhotels: NAB

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Nick Lenaghan

SOURCE: NAB

NAB commercial property index (points)

Optimistic outlook

0 10 20 30 40 50 60 70 80

Office

Retail

Industrial

CBD Hotels

CP Index

Q3 2015Q4 2015Next QtrNext 12 mthsNext 2 yrs

Confidence in the commercialproperty market hit a new high inthe fourth quarter of 2015, withoptimism strongest for the hoteland office market sectors, accord-ing to an industry survey.

A shortage of rooms nationally,the increase in tourism attractedby the lower Australian dollar anda pick-up in business travel arefuelling confidence in the CBDhotel sector.

Index sentiment towards thehotel sector surged from zero inthe third quarter to 50, in thequarterly NAB commercial prop-erty survey.

The tourism boom is expectedto push transactions in the sectorpast $4 billion this year afterrecord occupancies and roomrates were achieved last year.

Confidence in the office sectorwas second highest, moving to22 from 20 in the previousNAB survey.

Sentiment in industrial propertymarkets fell and is now weakestoverall.

Sentiment in the retail propertysector was also low but improvedslightly over the quarter amidconcerns household spendingmay falter as growth in houseprices slows.

‘‘NSW and Victoria remain atthe forefront of the improvementin market sentiment, with WestAustralia still wallowing in deeplynegative territory,’’ said the bank’schief economist Alan Oster.

Optimism for commercialproperty was greatest for the NSWmarket over the next two years.There was a big improvement insentiment in Queensland. Senti-ment was most pessimistictowards Western Australia.

Office rents in Western Austra-lia are expected to continue fallingheavily as the vacancy rate climbs,tenant demand weakens and themarket struggles to absorb a signi-ficant over-supply.

The survey taps the expecta-tions of around 250 players in theproperty industry, includingagents, developers, fund managersand investors.

Respondents expected CBDhotels would deliver the best cap-ital returns over the next oneto two years, of around 4 percent annually.

The office sector, whereproperty yields are tightening,was expected to deliver 1 percent and then 1.2 per cent capital

returns over the next two years.The respondents reported theywere more confident about thestate of commercial property mar-ket – across all sectors – in twoyears’ time than they were in thelast quarter of 2015.

But when the respondents wereasked about the market on a state-by-state basis, the anxiety aboutWestern Australia was clear.

It was the only state market toattract negative sentiment on thetwo-year outlook.

The One Collins Streetcomplex is fully-leased.

Stamoulis buys$125m CollinsStreet complex

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Larry Schlesinger

Property magnate and BRW rich lister Harry Stamoulishas bought the One Collins Street tower complex at thetop of Collins Street, Melbourne, for $125 million fromfellow rich lister Robert Magid and his sister, EleanorGoodridge.

The deal for the office complex, dominated by the17-storey modern tower overlooking Treasury Gardensand Parliament House and including an 1870s heritageresidence that served as Australia’s first war cabinetroom in 1914, was struck on a tight 5.25 per cent yield andat a high building rate of more than $9000 a squaremetre. The fully leased A-grade office complex, whichMr Magid, a prominent Sydney developer and publisherof the Australian Jewish News and Ms Goodridgeacquired for $43.1 million in 1997, is a blue-chip officeaddress, with an enviable tenant list that includesRabobank, Mckinsey & Co, Grant Samuel andIBISWorld.

It is understood the dealwas brokered by Paul Hen-ley and Martin O’Sullivan,of Knight Frank, both ofwhom declined to com-ment. One Collins Streetcame into play in 2015when developer Paul Frid-man, of Fridcorp, in part-nership with boutique realestate financier WingateGroup entered into duediligence, but a deal did noteventuate.

Mr Stamoulis, the son ofSpiros Stamoulis, whomade his fortune in soft-drink beverages, runs theStamoulis Property Group,which recently sold 277William Street to EG Funds Management for $45.9 mil-lion and is offloading another Melbourne office tower,120 Spencer Street, for about $165 million.

Both the building rate and yield for One Collins Streetare at the expensive end of recent office deals on CollinsStreet, which has had a flurry of activity with about $1 bil-lion worth of towers changing hands in the past 12months. The tightest yield was most likely AMP Capital’s$39 million acquisition of 425 Collins Street from theHalim Group, struck on a 5 per cent yield in September.

According to CBRE, the record building rate on CollinsStreet was the $12,000 a square metre paid by Singaporeinvestors for Newspaper House, at 247 Collins Street,which sold for $23 million in May 2015.

Kidman sale reopenswith latecomers invited

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Matthew Cranston

Australia’s largest landholder S. Kidman & Co hasannounced that a sale process for the company is backup and running with existing bidders following a knock-back from the federal government on grounds of thenational interest test.

S. Kidman & Co managing director Greg Campbellconfirmed new parties would still have a late opportun-ity to bid, provided they did not require Foreign Invest-ment Review Board approval.

‘‘The sale process has given equal and ample oppor-tunity to all buyers, foreign and Australian, to fullyreview the business and to lodge binding bids,’’ MrCampbell said, ‘‘Should the Treasurer approve foreignbuyers to buy Kidman, any interested party not subject toFIRB approval will have the opportunity to lodge acounter-bid,’’ he said.

Mr Campbell said Kidman, and the EY team selling thebusiness, had continued to honour confidentiality agree-ments and have steadfastly refused to comment on theidentity of buyers or the structure of their bids.

Sources suggest Chinese group GLAM has offered abid as high as $370 million while another Chinese groupPengxin has offered $350 million. Transport magnateLindsay Fox and crowdfunders DomaCom are also inter-ested.

‘‘It is widely understood that the FIRB process and thenational interest test are not in place simply to removeforeign buyer competition. This is particularly importantonce foreign bidders have set a price using internationalbenchmarking, and their removal would, unreasonablyfor them and the sellers of a business, potentially create adiscounted buying opportunity for Australian parties.’’