$85m sale breathes life into commercial sector

In a sign that Perth's commercial property market may be warming up, Wesfarmers House has sold to Jandakot-based Ascot Capital Ltd for almost $85 million, although the price represents a significant discount on the property's 2007 value.

The sale, which was the largest recorded in the CBD so far this year, delivered a profit of $37.3 million to the building's owner, Melbourne-based Orchard Funds Management's unlisted commercial office fund.

In a sign of how far the market has fallen from its peak, the sale represents a near 20 per cent discount on the $100 million the property was valued at last year.

According to Ascot Capital director Greg King, one of the asset's key attractions was the timing of rent reviews for two key tenants - Wesfarmers, which occupies four levels of the building, and law firm Talbot Olivier.

"It's been very difficult to get a deal to work in the current market, to balance gearing and debt levels with returns, but ultimately with the review from Wesfarmers it makes sense to us," Mr King said.

The sale of Wesfarmers House is the fourth major on-market transaction in the CBD this year.

Others transactions include the sale of Singapore Airlines House at 178 St Georges Terrace for $19.3 million to a Singaporean investor, and 30 The Esplanade, which sold to AMP for just under $40 million.

It was a win for owner GE Real Estate, which has struggled to offload two other buildings in its portfolio during the past year. The first of these, formerly known as the Paragon CBD tower and arcade at 160 St Georges Terrace, was taken off the market in November last year after it failed to sell during a sales campaign.

Another prime asset, Allendale Square, for which GE paid $154 million in December 2006, was taken off market earlier this year, despite fielding several written offers.

GE has also managed to sell 251 Adelaide Terrace for about $35 million, to GDI Property Group, after a sales campaign that closed in February.

Meanwhile, the latest round of campaigns has closed, with Allco Finance Group understood to be considering an offer for its half-share in Central Park, held by the group's Commercial Real Estate Investment Trust.

Allco bought its stake in the 48-storey building in 2005, for $159 million, from superannuation fund GESB.

Tenders for the former ABC site on Adelaide Terrace are also entering their second round, after the corporation received multiple offers for the site.

Still up for sale is 111 St Georges Terrace, which was placed on the market last month by Melbourne-based Becton Property Group, which is a shareholder in the trust that owns the building.

The property was valued at $91.7 million in March last year.