Property News

ANZ banking on Docklands

28 September 2006

ANZ has made the biggest property investment decision in the bank's 160-year history by agreeing to pay $478 million to buy Australia's largest office building from Lend Lease.

With a fit-out for the planned 87,000sqm Melbourne Docklands building expected to cost the bank a further $150 million, CEO John McFarlane yesterday described the $620 million move as the single most important administrative decision in the bank's history.

As foreshadowed by The Australian, ANZ chose Lend Lease's Victoria Harbour precinct as the site for its new building, which will accommodate 5500 staff when completed in the second half of 2009, .

But yesterday's announcement was not without some surprises.

Firstly, the 10-level, open-plan type office building - which the ANZ hopes will be cooled by water pumped from the nearby Yarra - has grown in size from ANZ's initial 80,000sqm requirement to 87,000sqm, making it Australia's largest single office building.

It is estimated to be a mere 50sqm larger than Melbourne's Rialto, Australia's tallest and largest office tower, built by Grocon in the 1980s.

Only a handful of office buildings, including Sydney's AMP Centre Tower and Grosvenor Place and Melbourne's 101 Collins Street, are larger than 80,000sqm.

Secondly, it will abut the Docklands' most controversial site, the old West Melbourne gas works that took years and around $50 million to repair.

Although the site has been cleaned up, it will never be built on, instead becoming Australia's most expensive park.

But the biggest surprise was ANZ's decision to purchase the building outright, and in the process turn down an offer by Lend Lease to lease back the building to ANZ. Lend Lease struck a similar deal with National Australia Bank for its nearby 56,000sqm, two-building Docklands complex.

Mr McFarlane said buying the building was ANZ's best option. The property would be a blue-chip investment.

He said the $478 million purchase, to be made in progress payments to Lend Lease, would have a negligible effect on ANZ's balance sheet.

Mr McFarlane also said that the bank had no plans to sell the building to a property trust. And he did not rule out the possibility that ANZ could eventually move its 100 Queen Street headquarters operation to the new building, which includes 3436sqm of retail space and is likely to have an 801 Collins Street address.

All up, the move to the Docklands involves relocations from eight other Melbourne sites.

ANZ head of property Jane Hamilton brokered the deal, which will result in the planned complex being built on a 15,000sqm Yarra-facing site, directly opposite Mirvac's Yarra's Edge apartment development.

The $377 million cost of the building, excluding the fit-out, leaves Lend Lease with a $100 million buffer. But from that it must pay the Victorian Government land authority, Vic Urban, about $9 million for the site, as well as foot the bill for other costs including finance charges, stamp duty and GST.