04/06/2008 - 22:00

Saville in talks over Capital Square

04/06/2008 - 22:00

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Three months after it last revised its Capital Square project, developer Saville Australia is in discussions with four ASX-listed property investors with a view to selling the site.

Saville in talks over Capital Square
CHANGE OF PLAN: Property developer Saville is in talks with four listed property trusts to sell its Capital Square project. Photo: Grant Currall

Three months after it last revised its Capital Square project, developer Saville Australia is in discussions with four ASX-listed property investors with a view to selling the site.

Saville, which is undertaking the $1.3 billion project with joint venture partner Babcock & Brown, had originally planned to build three apartment towers on the former Emu Brewery site.

Changing market conditions and strong demand for office space forced a rethink earlier this year.

The new plan, for a 60,000 square metre office building and one apartment tower, was announced in March, although a development application has yet to be lodged with the City of Perth due to issues with the design of car parking space.

Property sources told WA Business News they believed the decision to place the project on the market was most likely made by Babcock & Brown, which has suffered a 50 per cent drop in its share price since December.

The move comes five months after Melbourne-based builder Contexx Pty Ltd exited the project, leaving John Holland to fill the gap on the forward works for the apartment tower.

At the time, it was reported that rising construction costs and labour shortages had prompted the Contexx move, but WA Business News understands Saville wanted to change the terms of its contract with the builder.

While Contexx was signed on for all three apartment buildings, Saville is believed to have sought to renegotiate the contract after it decided to go ahead with the office tower.

Meanwhile, new contractor John Holland is yet to lock in an agreement for the full construction of the apartment tower, although the company's western region general manager, Adam Harry, said negotiations with Saville were continuing.

Mr Harry said the company was hopeful its initial contract with Saville would lead to an agreement for the entire project.

Saville had originally said it would aim to finalise the contract in April.

Despite its off-market discussions, the company is set to begin marketing its office tower this week, through appointed agency Jones Lang LaSalle.

Saville director of sales and marketing, Peter Gianoli, said that although the company would prefer an anchor tenant with a 20,000sqm commitment, the more likely scenario would be two companies, taking 10,000sqm each.

The number of tenants still in the market for a large amount of space has dwindled in recent months, following the Department of Premier and Cabinet's deal to anchor stage two of Multiplex and Hawaiian's joint venture, Bishops See.

Engineering firm Monadelphous Group is also rumoured to have signed on to Finbar Group's office development on the former Nutrimetics site in Victoria Park some time ago.

While Monadelphous is yet to confirm its leasing arrangements, sources have told WA Business News the company has signed the 16,000sqm site for $395/sqm.

Oil and gas player Chevron is one company believed to still be in the market, despite having signed a lease for a 4,000sqm building at 26 Thomas Street in West Perth last month.

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