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Ocean Sky International to buy Melbourne office block for A$21.8m

CATALIST-LISTED civil engineering firm Ocean Sky International has inked a deal to buy an office block in Melbourne for A$21.83 million (S$20.4 million), the board announced on Dec 20.

The four-storey freehold building at 541, Blackburn Road in the Monash Technology precinct has a net lettable area (NLA) of 3,628 square metres and is fully leased with a weighted average lease expiry of 3.83 years.

Net property income yield for the first year is expected to stand at 5.49 per cent after stamp duty, the company said in its announcement. Meanwhile, according to marketing agent CBRE's website, the property brings in an estimated income of A$1.3 million a year, with National Australia Bank and Latrobe Community Health among its tenants.

Ocean Sky disclosed that the price for its first Australian asset was reached on a willing buyer, willing seller basis, without any formal valuation, after it considered market prices in the area and "the group's assessment of the property's development potential".

CBRE later said in a press statement on Dec 23 that the unit price of more than A$6,000 per sq m based on NLA represents "a new benchmark for the precinct, which is experiencing some challenges due to the amount of supply" from other business parks.

While Ocean Sky did not identify the building's owner, marketing materials name it as Melbourne-based boutique fund manager Vantage Property Investments, which, according to The Sydney Morning Herald, bought the property for A$8.15 million in 2003.

Saying in a statement that the property is expected to offer "significant value and long-term opportunities", Ocean Sky chairman and chief executive Edward Ang added: "We have been exploring investment opportunities in Singapore and the Asia-Pacific region to seek diversified sources of revenue for sustainable long-term shareholder value."

Ocean Sky noted that the Melbourne purchase would grow and diversify its recurring rental income and group revenue, alongside an investment property in Singapore's Tuas View Close.

On Monday, CBRE said Ocean Sky had beat out "several domestic and inter-state investors" in its bid. 

Lewis Tong, national director of Asian services at CBRE, added that both domestic and offshore investors are confident in the longer-term prospects for the office sector in Melbourne. Asian investor demand remained "quite strong", with the majority of enquiries coming from Singapore and Hong Kong buyers in recent months, Mr Tong said.

The transaction, to be funded by a mix of internal resources and bank borrowings, is not expected to materially affect Ocean Sky's earnings and net tangible assets per share for the year to Dec 31, its board said.