Millett family poised to double its money on Thomasetti House

Sydney's Millett family is poised to more than double its money on the historic Thomasetti House.

The Milletts, who run an upmarket backpacking franchise called Wake Up!, bought the 277-279 Flinders Lane address in 2014, paying Rich-Lister Shesh Ghale $16. 2 million.

The Milletts snapped up the seven-level building less than two weeks after it listed, having spent years trying to break into the Melbourne market. But now they are selling.

The ornate Tomasetti House in Flinders Lane, Melbourne is being brought to market.

Despite a permit being obtained for the conversion of the property into a hotel, the booming Melbourne office market means its value is tied up in its existing use.

The Millets will retain control of The Millhouse lease but will recycle capital into their other hotel projects, including a new property in Byron Bay.

CBRE agent Josh Rutman - who is marketing the building with Mark Wizel, Julian White and Lewis Tong - said the property could fetch about $40 million.

Mr Rutman said there’s been a shortage of properties available in this price bracket.

"We saw a dramatic fall in the number of sub-$100 million CBD office investments in 2019, so this will be a very revealing test of investor demand in 2020," he said.

Recent deals on the strip include Swinburne University’s $44 million purchase of 226 Flinders Lane; the Fidinam Group’s acquisition of 22 William Street for $52 million and the Melbourne Theosophical Society $13.5 million strata office deal at Manchester House.

"Consulting, accountancy and even legal firms are now interested in a Flinders Lane address," Mr Rutman said.

Rents on revamped offices on the strip pushed past $700 a sq m last year. The building is now fully leased to office tenants with Zomp Shoes on the retail level. The Millett family spent about $3 million renovating the basement, which they now run as The Mill House.

The 3814 sq m tower was built in 1853 by William Degraves as a flour mill and grain store close to the town’s waterfront, which was then on the Yarra River fronting Flinders Street.

The original five-storey warehouse was revamped in 1905, gaining its new Art Nouveau facade and extra levels. Flinders Lane became the city’s rag trade district, a period that has only recently passed with the street’s transformation into funky offices, boutiques and bars.

CBRE agent Zelman Ainsworth said foot traffic from commuters, tourists, students and office workers had had a profound effect on the ground floor and basement spaces.

"The arrival of several high-profile retail tenants to the block, including Brunetti, is further testament to the strength of the location, with retail rents now breaking the $4000 a sq m barrier," Mr Ainsworth said.

While the Milletts are giving up on their hotel plans, up the hill at 175 Flinders Lane, on the eastern side of Swanston Street, Louis Li gave notice to all his office and retail tenants in 2018 and started work on his second Jackalope Hotel. Construction is under way.

Thomasetti House was one of the first city buildings purchased by Mr Ghale who sold in 2014 to help fund his restoration of the Argus Building.

Mr Ghale, who runs the private Melbourne Institute of Technology told Business in 2018 that he had always regretted selling the property.

The Wake Up! Group recently paid $18 million for the Bondi Backpackers in Sydney and runs the Lord Byron resort in Byron Bay.