Former Kings Cross drug den sells to pharmacy chain following K2 tenancy departure
A one-time notorious Kings Cross drug den sold at auction yesterday for $1.25 million, less than half what it traded for in 2002.
The 1995 Royal Commission that examined the drug trade investigated the Darlinghurst Road premises, formerly called Lasers.
In its heyday, drug seekers would head to the toilets in the premises, where they would pass money through a 30-centimetre by 30-centimetre hole in the ceiling and the drugs would would be passed back.
The drug joint was earning up to $20,000 a day, and the bouncers carried guns. The den relied on police tip-offs before drug raids.
The nightclub closed before the vendor bought the property.
The building was sold under mortgagee instructions.
It was owned by a Burwood-based Chinese investor who had bought it from Thanae Investments Pty Ltd for $2.75 million in 2002 with a lucrative lease.
The streetfront space had been leased by the NSW state government's Health Administration Corporation, on behalf of K2, the health administration corporation. K2, the Kirketon Road Centre, which provided a needle syringe service, health and social welfare advice, assessment and referral to drug treatment.
In 2011 the needle exchange moved to Victoria Street in Potts Point, leaving the vendor without his key occupant.
The Kirketon Road Centre signed the lease in 2001, paying $113,564 plus GST per year. The centre also paid 35% of the outgoings, which were set at $41,000 per year.
Rent reviews took place each year, and the rent was raised by CPI plus 1%.
Agent Miron Solomons says the rent from that tenant was much higher than usual given the nature of the business.
Colliers agent Matthew Meynell says the rent reached a net of $210,000 per year for the property before the tenant moved out.
The only tenant in the building at sale date was an internet café, which was on an unofficial agreement with the vendor and paying a relatively low figure for the space.
It was bought by a national pharmaceutical chain, which plans to install a shop front on the ground floor, an internet café on the first floor and to convert the upper levels into short-term accommodation.
The property on Darlinghurst Road has lapsed approval for a boarding house and was being sold as a mortgagee sale by PPB Advisory.
The five-storey building has a lower ground floor and first-floor retail, while the top three levels have lapsed development application approval for a five-bedroom boarding house with potential to convert them into residential apartments.
The building is potentially being offered as vacant possession or with a licence agreement for the first-floor retail area.
"There's huge residential demand in the area. Subject to council approval there is a conversion to residential down the track and an upgrade of the retail space," Solomons says.
In its current state the building is essentially unlettable.
"You couldn't inhabit most of the building in its current state. Upstairs is really stripped out and a raw shell. It needs capital to improve it," Solomons says.
Meynell says the vendor simply didn’t have to liquidity to develop the property into a boarding house.
The property has current yearly outgoings of $18,405 of council rates, $1,081 of water rates and $37,705 of land tax.
It comes with an eight-metre frontage to Darlinghurst Road and rear access via Kellett Way.
It comes on 176 square metres and has net lettable area of 500 square metres.
Marketing for the property says most hotels in Kings Cross run at 90% occupancy rates while the residential apartment vacancy runs below 2%.
The property is zoned mixed-use 10, which allows for allow a mixture of compatible land uses in appropriate circumstances, such as residential, retail, commercial, light industrial and industrial development.
The marketing for the property was previously occupied as a night club, with no mention of its more salacious history.
The 113-square-metre second floor is currently configured as a one-bedroom and studio apartment with laundry.
The 80-square-metre third floor is currently configured as three studio apartments.
The 57-square-metre fourth floor currently configured as two studio apartments.
None of the apartments have actually been completed, and they have not undergone separation of service.
Comparable sales include 48 Darlinghurst Road, a retail plus budget accommodation site on 171 square metres that sold for $3.85 million in 2011; 70A Darlinghurst Road, a retail and nightclub venue on 279 square metres that sold for $6 million in 2009; and 49 Darlinghurst Road, basement, ground and first-floor retail shop on 272 square metres that sold for $3.6 million in 2009.
Solomons says retails in the area range from $1,000 to $2,000 per square metre per year, office rents range from $400 to $600 per square metre. One-bedroom apartments rent anwhere from $350 per week to $800 per week.
He says he wasn't bowled over with interest at the auction, though there are always some bites at mortgagee sales.
The plans for the property were designed in 2009 by architects Antonius and Associates.
The site is not a heritage item but is located within the Heritage Conservation Area CA19-Elizabeth Bay Conservation Area and the Streetscape Area HS4-Darlinghurst Road.
