Travel Agents

Flight Centre agrees to sell Melbourne head office, raises $138 million as part of ‘Project Sky’

Huntley Mitchell

Huntley Mitchell

Flight Centre Travel Group (FCTG) has agreed to sell its Melbourne head office property for $62.2 million.

Travel Weekly understands numerous parties made offers to buy the asset, and the deal was negotiated in an abbreviated timeframe and subject to a very short due diligence.

The sale to Shakespeare Property Group is expected to be completed in July 2020.

Fitzroys director Paul Burns brokered the off-market transaction on behalf of FCTG, with the company committing to lease back 75 per cent of the property.

Five tenants occupy the fully-leased building, including Flight Centre and Football Victoria.

The 11-storey glass tower has a net lettable area of 7,506 square metres and is on a 2,317-square-metre site opposite Fawkner Park.

FCTG acquired the property 436 St Kilda Rd for $32 million in 2008 and has flagged the impending sale in its recent market announcements.

Flight Centre’s Melbourne head office property at 436 St Kilda Rd.

The announcement comes a day after the travel agency giant revealed to shareholders it had raised $138 million through its retail entitlement offer at $7.20 per new share.

FCTG received over 13,000 applications for the offer, for approximately $92 million, representing a take-up rate of approximately 67 per cent.

In addition, around two million shares were accepted under the company’s oversubscription facility, increasing the total take-up from eligible shareholders to roughly $106 million (or 77 per cent).

There were approximately 4.4 million new shares that weren’t taken up under the retail entitlement offer, which will be allotted to sub-writers of the offer.

Approximately 19 million new shares to be issued under FCTG’s retail entitlement offer are expected to be allotted on Friday, and will trade on the ASX on a normal settlement basis on Monday.

Together with an institutional placement and entitlement offer, the company’s ‘Project Sky’ raising has totalled approximately $700 million.

Turner said he was “extremely pleased” with the support FCTG had received from its retail shareholders who participated in the offer.

“In addition to proceeds raised under the placement and institutional entitlement offer, proceeds raised under the retail entitlement offer will be used to strengthen Flight Centre’s balance sheet and liquidity position, ensuring Flight Centre can trade through this period of dislocation and uncertainty across the travel sector,” he said.

FCTG’s latest raising is a welcome distraction from the cancellation fee fiasco that has engulfed the company in recent days.

After reducing the cap on cancellation fees last week amid the threat of a class action, FCTG backed down even further this week by scrapping the fees completely.

While the move was welcomed by the Australian Competition & Consumer Commission, it prompted the opposite reaction from the Australian Federation of Travel Agents, with CEO Jayson Westbury arguing that agents were “well within their rights” to charge cancellation fees.

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