Melbourne investor Brendan Sullivan has paid $8.65 million for two Mulgrave office buildings, one of which has stood partly-vacant since it was built in 1990.
If fully leased, the deal would reflect a 14 per cent yield.
Mr Sullivan said the fully leased West Building at 327-329 Police Road was a straightforward passive investment.
"The other is a real challenge. Seventy-five per cent of the buildings are fully leased but the remaining space is virgin territory. The carpet is 22 years old but has never been walked on," Mr Sullivan said.
The transaction was negotiated by Colliers International agents Peter Bremner and Jeremy Gruzewski, who explained how a building could remain vacant for nearly 25 years.
"At the time Mulgrave was a pioneering office location and there wasn't much around," Mr Gruzewski said. "It also wasn't a very significant part of the vendor's property portfolio."
The 2228-square metre West Building is leased to BNR Partners and Elgas on four-year terms. The 2351-square metre East Building at 331-333 Police Road is only half-leased. They return just over $900,000 a year in rent but could earn up to $1.21 million.
"A strata subdivision may well be the most appropriate option," Mr Sullivan said.
Mr Sullivan has recently refurbished and strata-subdivided the former Katherine Square complex at 517-535 Flinders Lane in the city.
He paid the Smorgon family $16.35 million for the two buildings, which are now worth $45 million.
The vendor of the Mulgrave buildings, which are opposite the Waverley Gardens shopping centre, was the Trust Company Fidiciary Services.
Mr Gruzewski, along with Dawkins Occhiuto, is also marketing a 21,165-square metre super site in nearby Springvale which stretches between Princes Highway and Centre Road.
The site, owned by the Langer family's GLG Investments for about 30 years, is made up of three separate properties which are for sale individually or as one site.
They are located between Bunnings and the Springvale Homemaker Centre at 867-879 Princes Highway and 1671-1673 Centre Road. The 8069-square metre Centre Road parcel is triangular with a narrow frontage. The remaining two rectangular sites face the Princes Highway.
They are rented to a variety of tenants and return a total $254,209 a year in rent.
Mr Gruzewski said there are demolition clauses in the leases which would enable a new owner to continue earning income but move quickly on any development opportunities.
"It's part of that Monash precinct which is moving from heavy industrial to retail and office. It could suit a big box retail development, a staged office-warehouse development or a showroom," he said.
