Melbourne tower plan abandoned as Tarascio family sells its city site and hits out at Allan government

The Tarascio family has sold off a prime Melbourne site where it had planned a luxury tower for more than a decade, as financial conditions in Victoria sour.

Property developer Sam Tarascio says they will look for opportunities in other states due to uncompetitive settings in Victoria. Picture: David Geraghty

The billionaire Tarascio family has sold off a major development site in the heart of the Melbourne CBD to the owner of the neighbouring 101 Collins Street skyscraper, and has lashed out at the Victorian government.

The family’s Salta property development operation sold off 63 Exhibition Street, where it had long planned a luxury residential tower before it was hit by rising costs and prospective buyers being deterred by high taxes.

The now 13-storey office block has been bought by the Commonwealth Superannuation Fund, owner 101 Collins Street, which has been buying nearby buildings in order to have control over the developments that surround it, multiple property sources said.

Developer Lendlease last year considered buying the site but did not pursue its idea, partly as conditions have soured since the Allan government imposed new taxes. 

JLL’s Josh Rutman, Jesse Radisich and MingXuan Li handled the sale but they declined to comment.

Despite being one of Victoria’s top retail and industrial property developers and having a substantial build-to-rent pipeline, Salta says it will invest in other parts of Australia.

The company said it was considering placing a greater focus on geographic diversification of its portfolio in response to the “uncompetitive settings” in Victoria. The developer said its decision to sell was “an outcome that was “significantly influenced by the heightened risk that exists for developers in Victoria as a result of the state government’s increased taxes, charges and levies that have been imposed on the sector”.

A plan of how the tower would have looked.

It also cited broader effects of escalating construction and supply chain costs across Australia.

Salta criticised the effect high taxes in Victoria were having and that the appetite was shifting towards lower-risk projects until there was a stabilisation of conditions in the state market, “particularly in relation to Victorian government taxes”.

It bought the site in 2014 and was granted approval for a 52-storey apartment building.

“It has been a regrettable decision to divest this prime asset, but we have had to take a pragmatic approach to the level of risk we are prepared to take in Victoria,” Salta managing director Sam Tarascio said.

“In Victoria, we are focusing our attention on parts of the market where government policy is supportive, such as build-to-rent, where the state government has implemented incentives including its land tax discount and fast-track planning opportunities,” he said.

The property scion has argued for better policies to improve conditions for development in the state for years and says it should act to stop capital leaving in response to hefty tax burdens.

“We call on the Victorian government to work more collaboratively with the property sector and re-evaluate the significant increases to taxes, fees and charges to give the sector a chance to restabilise,” he said.

Mr Tarascio said changes were needed in order to ensure that housing targets were met and that the sale of the Exhibition Street property also meant it was unlikely to add to supply.

“This is critical to delivering on the housing needs of this state – and to stop the flow of capital out of Victoria to more supportive jurisdictions,” he said.

Large institutions have been avoiding investing in Victoria due to its high taxation regime, hostility towards development and concerns among some foreign investors of sovereign risk issues. Very few large property transactions have been closed in the past year, although some players are making counter-cyclical investments.

Salta said the sale would also allow it to redeploy funds into its significant build-to-rent and industrial development pipelines.

The tower at 101 Collins St is owned by super fund CSC and its mandate is managed by GPT, which declined to comment.

Salta last year said that the state needed to put policies in place to ensure major projects stacked up, even as it was putting millions of dollars into major office, industrial and build-to-rent projects in Melbourne’s suburbs.

The Tarascio family’s wealth is estimated at $1.7bn and Salta has undertaken $4bn worth of property projects in over five decades.

The company’s Est BTR platform spans a pipeline of 4000 apartments that will have an end value of $3bn, and will include projects in Fitzroy North, Docklands and Richmond.

Work on the first large-scale project is due to begin next year.

Originally published as Melbourne tower plan abandoned as Tarascio family sells its city site and hits out at Allan government