Alfasi Group has moved forward with plans to continue building an office tower in Melbourne after securing additional funding during Covid-19.
The development group self-funded the initial stages of construction for the nine-storey commercial building at 510 Church Street, Cremorne in mid-2019.
Alfasi then made a $150 million structured finance deal with Merricks Capital to finalise the build by the end of 2021 with Victorian-based Kane Constructions.
The terraced design for 510 Church Street by Cox Architecture features outdoor green spaces, ground floor retail, 150 bicycle spaces and 18,000sq m of A-grade office space.
Office vacancy has been on the rise in Melbourne during the pandemic, up to 7.7 per cent with -42,300sq m of net absorption due to the completion of a number of new developments, according to JLL research.
The Reserve Bank’s warning of a dire outlook for the sector made financing difficult, as private and bank lenders tightened lending conditions.
Merricks Capital chief executive Adrian Redlich said that even before Covid-19, banks were reducing their exposure to commercial property.
“Lending restrictions have made conditions difficult for both banks and developers which has hamstrung the industry, with less development and investment resulting in slowed economic growth,” Redlich said.
“These circumstances have been exacerbated by Covid-19.”
Merricks Capital managing director Andrew Torrington said to provide finance, the company had to create a debt structure which suited Alfasi along with the volatile market conditions.
“The 510 Church Street development is an example of a complex, challenging deal which saw many potential financiers back out,” Torrington said.
“The project itself is an exciting one to be a part of.
“Cremorne is an up-and-coming business district and we expect this A-grade development to draw high-profile tenants out of the Melbourne CBD.”
Despite a poor outlook for the office sector in Melbourne, Cremorne has continued to attract tenants including Tesla, Uber, the Walt Disney Company, Carsales.com.au and REA Group.