Forza 399 Lonsdale Street Fund

399 Lonsdale Street, Melbourne, VIC

KEY PROPERTY INFORMATION
Land Size1,141m²
Building Size10,033m²
Occupancy62%
Purchase DateDecember 2021
Purchase Price$86,800,000
Current Valuation$86,800,000

The Forza 399 Lonsdale Street Fund is an unlisted property fund which holds a well constructed but largely unrefurbished 10,033m² commercial office building with 14 car parks (the “Property”). Located centrally in the CBD, the Property represents an attractive acquisition given so few investment grade office assets transact in Melbourne.

Purchased off market for a very compelling price of $86,800,000 or $8,651m², the Property is currently 100% occupied with a WALE of 1.5 years but there will be approximately 38% vacancy in March 2022 when a major tenant vacates. There are multiple opportunities to add value to the Property. First, the Fund intends to pivot the building from
education users to more typical office users and enhance the net rental income, whilst positioning the Property into
what is anticipated to be an improving rental market. Second, the basement car park currently generates
no income and can be refurbished and leased for hospitality (likely bar or restaurant). Third, it may be possible to
construct additional levels above the existing structure from which additional rental income can be generated.

399 Lonsdale Street sits centrally within the Melbourne CBD and is a building with fantastic natural light to 3 sides. Once refurbished, it will present as a compelling leasing option for tenants looking to upgrade their office accommodation.

In recent years approximately $6.6 million has been expended on the Property on key works, and the Fund has provisioned another $19.5 million as part of the refurbishment and repositioning strategy.

Based upon its purchase price, the Property has been acquired at a passing yield of 4.98% and building rate of
$8,651m² based on NLA. Including 400m² within the basement that has been identified as potential retail or
hospitality space, the NLA purchase rate falls to $8,319m². Of the most recent comparable sales in the last 18 months, the average yield is 3.95% and the average NLA rate is $10,489m² – on this basis the Property compares very favourably.

A key strategy of the Fund is the refurbishment and repositioning of the asset, taking advantage of the existing vacancy to undertake the works. The hope is that this Fund can continue to demonstrate Forza Capital’s expertise in refurbishing and recycling older buildings to retain embodied carbon whilst achieving leading sustainability targets.


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