CAPITALAND Investment : 9CI 0% (CLI) has acquired a freehold office tower in Melbourne, Australia for its regional core-plus fund, CapitaLand Open End Real Estate Fund (Coref).

While the deal value was undisclosed, CLI in its press statement on Tuesday (Jun 7) said the acquisition brings Coref’s total investment to about US$900 million since the fund was established in August 2021.

It also marks CLI’s fifth investment in Australia within 6 months, while being Coref’s first acquisition in Australia and the fund’s fourth in Asia-Pacific.

Spanning a net lettable area of 32,000 square metres (sq m), the 22-storey office building is located at 120 Spencer Street opposite Southern Cross Station in Melbourne’s CBD (central business district).

The building has an office occupancy of 97.5 per cent with a weighted average lease expiry (WALE) of 6.7 years. Its tenant base includes co-working space provider WeWork as well as local educational institutions such as Queensland University and Redhill Education.

CLI noted “strong embedded value” of the property over the longer-term, given its prime island site with triple street frontages and a potential 22,000 sq m of unutilised gross floor area.

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It added that the property has undergone A$30 million (S$29.7 million) worth of upgrading works including the recent installation of energy-efficient mechanical and engineering equipment, which has allowed the building to operate fully on green electricity since Nov 1, 2021.

Highlighting Australia as one of CLI’s focus markets where the group sees "significant potential for growth", the group’s managing director for Australia, Paul Toussaint, estimates CLI has invested about A$1.5 billion across its 5 assets in the country over the past 6 months through both the group’s private and listed funds.

“In view of the post-Covid recovery and companies’ steady return to work, we believe that the Australian office market is showing signs of growth that will overcome the near-term challenges of vacancy and tenant incentive levels,” said Toussaint.

“120 Spencer Street is well positioned to capitalise on this given its strong WALE, vibrant location benefiting from the area’s rejuvenation, and potential for enhancements.”

Shares of CLI ended Tuesday down 0.3 per cent or S$0.01 at S$3.88.