Rich Lister Harry Stamoulis has swooped on a central Melbourne office tower, the home of explosives manufacturer Orica and the country’s first skyscraper, in a $155 million deal that is one of the city’s biggest over the past year.
The acquisition of the 19-storey building at 1 Nicholson Street from a Charter Hall-run fund was struck below its book value. Charter Hall has not disclosed the size of what is understood to be a single-digit percentage-point discount.
1 Nicholson Street in Melbourne 
The transaction will be closely noted by players in a market which has been starved of major trades for the past year as office values fall, under pressure from higher rates and softening demand. Owners and prospective buyers have been in a stand-off with deals slowing to a trickle, as both sides await more clarity on valuations.
The Nicholson Street property was held in an $3.1 billion wholesale fund run by Charter Hall, the Direct Office Fund, whose portfolio value had fallen by 5.4 per over the six months to June 2023, resulting in a negative 5.5 per cent total return for the year, according to its most recent quarterly report. Charter Hall itself is the single largest investor on the fund.
Charter Hall chief executive David Harrison noted the building’s completion 65 years ago. It was divested not to meet redemptions – withdrawals are available from DOF semi-annually with payment for the latest offer early last month – but as part of ongoing modernisation of the fund manager’s entire portfolio, he said.
“So it’s in line with our strategy of selling older buildings, while retaining and reinvesting in newer buildings,” Mr Harrison told The Australian Financial Review.
“We’ll continue to curate the older secondary assets and modernise our portfolios.”
In July, Charter Hall sold off an $80 million university building in Sydney’s Kensington from another one of its unlisted funds. It had previously told investors in that fund it would need to satisfy their redemption requests through staggered payments as it weathered a choppy commercial property market.
The process of price discovery in Australia’s battered office market is inching forward, with discounts registered in some of the few deals that are being struck. In Sydney, a prominent office at 1 Margaret Street was sold by Dexus in late August for $293 million, a 16 per cent discount to its previous book value. In Melbourne, Mirvac has agreed a deal, subject to finance, to divest a $413 million Collins Street tower on a 13 per cent discount.
Brokered by Cushman & Wakefield’s Nick Rathgeber and Leigh Melbourne and CBRE’s Kiran Pillai and Scott McGlone, the 1 Nicholson Street deal provides the next benchmark for Melbourne’s office market.
On the edge of the CBD, the building already holds a significant position in the country’s commercial property history. Built in 1958 as the headquarters of Imperial Chemical Industries – the forerunner to Orica – it was an early example of the modernist international style of architecture with its clean lines and sheer curtain walls, soaring above previous height restrictions.
Designed by Bates, Smart & McCutcheon, the building’s service core was placed at the side to allow better use of space, an innovation later adopted by some CBD buildings. It remains the Melbourne office of successor design firm Bates Smart.
Its sale to the Stamoulis family, who have parlayed a fortune founded in the Gold Medal soft drinks business into a property empire, follows an emerging pattern as publicly listed landlords sell out of older towers to private players.
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