He had called a female escort and arranged to meet with her at the said location.
Australian police yesterday shot dead the man who had taken the woman hostage and said they were investigating whether the incident was terror-related.
The gunman later left the building and shot three officers before police killed him.
Three officers were wounded in the shootout which ended the siege, and a second man, in addition to the hostage-taker, died from a gunshot wound, police said.
The 29-year-old Somali-born refugee was one of two men acquitted by a jury in 2010 of plotting a suicide attack against a Sydney army base.
Prime Minister Malcolm Turnbull said there were "very grave questions" about how Khayre got parole despite his violent, criminal history. "It is a terrorist attack and it underlines the need for us to be constantly vigilant", he said.
Khayre was said to have beaten up a young woman and headbutted her father during the robbery.
According to Australian media, he was also known to counter-terrorism authorities for his alleged involvement in a 2009 terror plot to attack the army barracks in Sydney.
Australian investigators immediately raised concerns about the possibility that the violence had been inspired by recent acts of terrorism committed in the United Kingdom, including, most recently, a deadly attack on London Bridge.
The siege has ignited debate about local parole laws after it emerged Khayre had a history of violence and was released from jail previous year following an aggravated burglary.
IS claimed responsibility for the attack online, but Commissioner Ashton downplayed their statement.
Later, Islamic State said one of its fighters carried out the attack because of Australia's membership in the US-led coalition.
"He appears to [have been] in the wrong place at the wrong time", Commissioner Ashton said.
"Subsequently he (Khayre) came out of the apartment with a shotgun and commenced to fire at police at the entry-way to the apartments..."
Australian bomb squad police are seen entering the Buckingham Serviced Apartments in Bay Street in Brighton in Melbourne, Australia, on Mon., June 5, 2017. The woman, in her 20s, was not harmed.
Police said they were also conducting "reassurance patrols" to calm the neighbourhood.
"We believe at this stage from the information we have that he was acting alone and there isn't a sort of ongoing threat in relation to any plot or anything around this individual". The woman was rescued, and another man was found dead in the lobby, the police said.