Sands & McDougall Building Listed for $75m

The owner-developers of three neighbouring commercial buildings in Melbourne’s CBD have listed the site for $75 million, after canning plans to pursue a 190-key mixed-use hotel project.

Hotelier and racehorse owner Aziz Kheir, Probuild founder Phil Mehrten and developer Frank Palazzo are looking to offload the site in the western corner of Melbourne’s CBD.

The trio secured a hard-fought development approval for a 23-storey mixed-use tower in September last year. The $56 million scheme, designed by architecture firm Hachem, included a bridge connection built over McDougall Lane.

Kheir, Mehrton and Palazzo acquired the amalgamated site from investment house Hume Partners for $38.8 million in 2015.

The owners appointed CBRE agents Mark Wizel, Josh Rutman, Lewis Tong and Scott Orchard to sell the three properties, including the historic Sands and McDougall building at 355 Spencer Street.

The 7,363sq m Sands and McDougall building formerly housed the Melbourne publishing house, best known for its annual directories of Melbourne, Sydney and Adelaide. The building was constructed in 1888.

The agents cited recent transactions including the heritage Swann House at 22 William Street, which sold in late 2019 for $52 million, and the former Don Kyatt Automobiles warehouse, which was picked up by American giant Sentinel for $17 million.

Private and institutional investor groups are continuing to pursue Melbourne CBD properties as interest rate cuts create a greater yield spread between rentals and acquisition costs.

Earlier this month, a freestanding two-level building at 384 Bourke Street changed hands for $22.5 million on a yield of just 2.6 per cent.

The sale represented 50 per cent uplift on its 2015 transaction price.