The Hour Glass

[Corgitator]

Another big purchase in Aus.

PROPOSED ACQUISITION OF A PROPERTY IN MELBOURNE, AUSTRALIA

THE PROPERTY
The Property is a four-storey retail and commercial office building (with basement carpark) occupying a site area of approximately 563 sqm, and is located on Collins Street, Melbourne’s main luxury retail precinct. The Property has a gross lettable area of 2,494 sqm. The Property has a retail tenant occupying the ground and first floors and other tenants occupying two levels of commercial offices.

3. PURCHASE CONSIDERATION
The consideration for the purchase of the Property is A$68.0 million (approximately S$67.3 million) (the “Purchase Consideration”). The Purchase Consideration was arrived at on a “willing buyer-willing seller” basis, based on THGA’s assessment of the Property’s value having regard to its prime location. The Purchase Consideration will be funded by internal resources and bank borrowings. A deposit of A$6.8 million was paid by THGA at the exchange of the SPA. The balance of the Purchase Consideration is payable in full upon completion of the sale and purchase of the Property pursuant to the SPA, which is expected to be effected in December 2020

https://links.sgx.com/FileOpen/Proposed%...eID=641613

As a shareholder, I have mixed-feelings about this purchase:

• On one hand, it shows decisiveness, consistency and an appetite for growth, THG having recognised Australia as a key growth market for some years.
  
• On the other hand, if country relationship between Australia and China do not recover or worse deteriorate further, would Australia's spending (domestic and visiting tourists) on luxury goods go into a deep decline? And THG has invested quite a lot in Australasia.
  
• Is A$68m a good deal? It seems to me that THG does not quibble when its a high-quality property. 
  

https://theurbandeveloper.com/articles/l...market-50m-

Louis Vuitton Building Hits the Market

The building containing Louis Vuitton’s flagship store on Collins Street will test demand for prime Melbourne CBD assets as it hits the market ahead of the anticipated end to the city’s strict lockdown, with price expectations of more than $50 million.
Located at 139 Collins Street, the Kearney family are offloading the four-storey retail and commercial building which sits on the corner of Collins and Russell Streets. It last changed hands for $16.2 million in 2006, from the previous vendor registered as a "trust company".
Louis Vuitton’s flagship store occupies both the ground floor and level one, on a 15-year lease expiring 2026.
John Marasco, Oliver Hay, Matt Stagg and Daniel Wolman of Colliers International have been appointed to manage the International Expressions of Interest campaign.
“There is overwhelming pent up purchaser demand for prime Melbourne CBD assets from local, interstate and offshore investors,” Marasco said.
“Benefiting from a prime Collins Street location and anchored by Louis Vuitton, we anticipate the offering will be hotly contested and demonstrate the robustness of the Melbourne CBD market.”
Stagg described the Louis Vuitton boutique as arguably the most coveted trophy asset in the Melbourne CBD.
“Colliers receives more unsolicited enquiries to acquire this property than any other in the Melbourne CBD,” Stagg said.
The building is fully leased with a WALE of 5.05 years.
Constructed in 1888, the building was designed by architect William Salway, and has had six owners in its 130-year history.

Paying $68M for a property that generates $0.8M earnings. Doesn't seem to be value investors. Unless the property has been under-earning its true earnings potential, the only way this transaction can be value-accretive is to have a bigger fool take the property off the hands off THG. And I consider that speculation, not investing.