AFR: Crescent Wealth swings out of Southbank exposure

7 June 2017 – reported by Nick Lenaghan for the AFR’s business section covering investments.

Australian Islamic investment manager Crescent Wealth has made a tidy exit from Melbourne’s Southbank, selling an office building for about $37 million to a private investor. The sale of 10-16 Dorcas Street represents a handy turnaround for Crescent, which bought the building just two years ago for $30.75 million. Transfer documents for the transaction do not show a current mortgage on the new acquisition. The price struck for the deal, brokered off-market by Fitzroys’ Paul Burns, represents a yield of about 6.5 per cent. The deal comes as buyers and sellers in the commercial market ponder whether prices are nearing a peak.

Asset scramble

The debate is particularly intense at the retail end of the market, where individual investors are scrambling for assets at tight yields. The yield on Dorcas Street property, just a block down from the St Kilda Road precinct, may well have been sharper but for the expiry of the single occupier’s lease late next year. The eight-level, 7608-square metre building is leased to technology company Dimension Data. On the upside, the building may harbour redevelopment potential, with neighbouring properties rising much higher. Dorcas Street is the boundary between Southbank and South Melbourne. The building is just a short walk from the busy St Kilda Road precinct, near the Shrine of Remembrance and the Royal Botanic Gardens. Crescent Wealth was established a decade ago and offers superannuation and other managed investment products that comply with Islamic finance principles. The investment manager avoids investing into companies and industries that profit from alcohol, tobacco, gambling, interest on money and other categories. It was the first foray into direct property for Crescent, which bought the property from Cromwell Property Group. On the city fringe, the Southbank and South Melbourne markets have been busy this year. In March a super-site in inner-city South Melbourne, occupying a whole suburban block opposite the popular local market, sold for $41 million to the Langer family’s GLG Group.

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