A landmark Brisbane office tower housing the global headquarters of Flight Centre and Virgin Australia is set to change hands for a whopping $255 million.
LDR Capital, the real estate investment arm of the Lederer Group, has exchanged contracts to acquire Southpoint at 275 Grey St, South Brisbane, in one of the city’s major commercial property transactions.
Southpoint, the headquarters of Flight Centre and Virgin Australia has sold for $255m. Picture: David Clark.
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The prime-grade office and retail tower occupies a prized position in the heart of South Bank and is the only prime-grade Brisbane office building with direct, integrated access to a train station.
It is also fully occupied, with a weighted average lease expiry of eight years.
ASX-listed Flight Centre Travel Group and Virgin Australia have their global headquarters in the tower, while Flight Centre has committed to a new 10-year lease from October.
Below the offices, a retail centre is anchored by Woolworths Metro, McDonald’s and TerryWhite Chemmart on long-term leases.
The deal comes as available office space in the precinct becomes increasingly scarce.
Southpoint, at the corner of Grey and Vulture Streets in Southbank has sold for $255m. Picture: Annette Dew.
LDR Capital managing director Myles Brooks-Garrett said vacancy in the South Bank office market was sitting at just 0.9 per cent and had averaged 2.8 per cent over the past three years.
“Product like this is rarely traded and is typically reserved for the major REITs, superannuation funds and offshore institutions,” he said.
Southpoint will be held through the new LDR Grey Street Fund, with Lederer Group committing at least 25 per cent of its equity and becoming its largest investor.
The building is one of the most prominent in Brisbane. Picture: Supplied
Lederer Group founder and chairman Paul Lederer described Southpoint as an “irreplaceable building” in a precinct where the group says no comparable new supply can be built.
The group is acquiring the property at an 8 per cent capitalisation rate and says the purchase price represents at least a 35 per cent discount to replacement cost.
The fund is targeting an average annual distribution yield of 8.2 per cent over an initial five-year term and a 16 per cent internal rate of return, post-fees and pre-tax.
It is LDR Capital’s second wholesale fund, with the group now managing about $1.6 billion in real estate.