Chinese buyer signals Melbourne B-grade rush with $75m Elizabeth Street purchase

Colliers International's Daniel Wolman negotiated the Elizabeth Street deal with colleagues Matt Stagg, John Marasco and Oliver Hay, in conjunction with Teska Carson's Michael Ludski.

Mr Wolman said the Chinese buyer intended to keep the property as a passive investment, with an eye to its long-term development potential.

Elizabeth Street has seen an explosion of residential towers, built by local and offshore developers targeting the precinct's proximity to Melbourne's famed northern-city student quarter.

The 11-level building, which covers 2044 square metres, returns income of $4.5 million a year from anchor tenant RMIT University, consultants Accumulate and Reeds Consulting, and several ground-floor retail outlets.

It was taken to market with a price tag of about $75 million, but is believed to have sold for more than that.

Mr Wolman would not comment but said the price set a new benchmark for land values in the city, with the building transacting between $36,000 and $40,000 per metre on a sub-5 per cent yield.

The sale of Forza's Carlton south office, located outside the CBD grid, concluded on a slightly higher yield, about 6.04 per cent.

The Melbourne-based fund manager, led by Adam Murchie and Ashley Wain, purchased the building in 2012 on an 8.5 per cent yield for $20.6 million, providing investors with an 80 per cent increase in value over four years.

Negotiations were handled by Paul Burns of Fitzroy's and Alasdair MacGillivray of Bayley Stuart Real Estate.

"We felt it was an opportune time to test the market," Forza's Ashley Wain said. "We'd gone through a re-leasing exercise and has seen good rental growth in the last four years."

The four-level, 6178-square-metre office was fully leased to blue-chip Vic Health, Breast Screen Victoria, Novotech and Warner Brothers, returning passing net income of $2.24 million a year, with a weighted average lease expiry of 4.27 years.