[+] Good to Go: DA Approved Sites Flood Market

Real estate investment firm Belingbak is off-loading its downtown Sydney hotel mega-project, saying it wants to capitalise on the country’s post-Covid rebound in the hotel sector. The decision comes just six months after Belingbak’s joint venture with Melbourne-based ICD Property won unanimous approval from Sydney City Council for a 59-storey hotel and residential tower on a 1300-sq-m amalgamated site at 372-382 Pitt Street. The approved plans include a 301-key hotel, 21 high-end residential apartments and about 1000sq m of ground floor retail in a development with an estimated end value of $500 million . Belingbak says the decision to send the shovel-ready site to market is a strategic one, designed to recycle capital and implement a longstanding strategy to own and operate hotels. “Over the last 18 months, we have been working with some of Australia’s best hospitality people in building our team and preparing to enter the owner-operator space,” Belingbak founding director Robert McLean said in prepared comments. “We are now looking to deploy funds into this strategy and execute several of the opportunities we are seeing in hotel markets around Australia.” While no one is confirming an asking price, Sydney media reports the rare Pitt Street site is likely to sell for around $120 million. At that price, says Knight Frank’s partner and head of Asian markets Dominic Ong, it would be very good value. He points to the development’s gross floor area of 17,144 square metres. “That is less than $7000 per square metre,” he says, “which will show you in terms of buy history it will be very, very good value for money in terms of a development site per square metre.” ▲ The owners say they are off-loading the development-ready Pitt Street site to capitalise on the post-Covid rebound in the hotel sector. Meanwhile, 850km south in Melbourne’s inner fringe, Dexus is reportedly testing the waters with a shovel ready site of their own—an 11-storey office tower it acquired late last year. Little Projects, the development vehicle for Australian businessman and philanthropist Paul Little, had earlier won planning approval from Yarra City Council for the DKO Architecture design, which will sit on 1527sq m in Brighton Street in trendy Richmond. And on the Gold Coast, a well-known interstate development group is under contract to acquire a development-ready chunk of the masterplanned Queen Street Village precinct at Southport. A Brisbane-based developer is vying to buy a smaller tranche of the same project. The sites—with approvals for a 12-storey apartment building, a 480-bed student accommodation facility and a 14-storey hotel—came to market after the developer behind the $500-million project collapsed owing tens of millions of dollars. ▲ Dexus is said to be testing the market with a Richmond site, complete with approval for an 11-storey office tower, it acquired late last year. Up and down Australia’s eastern seaboard, and for a host of different reasons— capital raisings, insolvencies, rising construction costs, interest rates and the cost of capital, or just because an owner maybe testing the market, an increasing number of shovel-ready developments are up for sale. “I believe this is across the board,” GV Property Group principal and director Antonio Mercurio says. “We speak to people in Sydney and Melbourne and they have experienced the same scenario, probably earlier than what we have, based purely on the sheer size of those markets compared to the concentrated area of Gold Coast or south-east Queensland.” Mercurio, who is based in Burleigh Heads, points to several factors influencing the jump in shovel-ready developments coming to market. “The construction costs have drastically increased,” he says. “But developers can't borrow the money from the bank, they’ve got to go to a second tier or third tier lender, so money’s too expensive. “And in some cases they simply can’t get a builder to build the product let alone take on the work, so they can’t deliver it.” The construction environment and the country’s economy have not helped. Insolvencies figure prominently among the list of sales. When Remi Capital collapsed in May last year owing hundreds of investors around $70 million, Korda Mentha appointed global commercial real estate services company JLL to carve up some of the assets. One of those was a 2.8-ha site in Sunshine North, about 11km west of Melbourne, and already approved for a mixed-use development including supermarket, medical centre, childcare facilities, office space and 174 residential apartments with basement parking. Buyers are due to close on the purchase after agreeing to pay a reported $10.5 million. ▲ The Sunshine North development, formerly owned by Remi Capital. The property investment firm collapsed in May last year owing tens of millions of dollars. And late this week, a six-week expression-of-interest campaign closed on a 1591-sq-m site in Spit Road on Sydney’s swanky North Shore. That land comes with pre-approval for a five-storey shop-top development on three street-fronts with what is described as “24 over-sized luxury apartments”. Knight Frank’s Dominic Ong told The Urban Developer he was expecting as many as 10 offers with prices ranging between $35 million and $40 million. “Mosman postcode 2088 is one of the most sought after addresses on the North Shore,” Ong said. “You are about 1.5 to 2km from the beach, you’re in a very good location, and these sites are very, very rare. “They are much sought after.” The age-old adage apparent still holds true—it’s all about the location—particular when it comes to development-ready site sales. ▲ It's still all about location. Buyers are clamouring for this DA-approved site at 64-66 Spit Road on Sydney’s North Shore. Colliers Gold Coast director in charge Steven King agrees. It was his office that brokered the sale of land parcels in Southport’s Queen Street Village. “What we’ve seen with development sites is that it just depends on where it’s located,” he says. “Like if it’s a prime, unique beachfront-type asset then the market’s still pretty active. “But if it’s a second or third tier-type scenario where it’s away from those sorts of precincts, then the number of buyers is a lot thinner.” Sydney-based Guillaume Volz is national director of residential for Colliers. He points out construction costs are the same, regardless of the site location. “The thing that’s not commonly picked up is that construction costs have increased, generally, at the same level, regardless of whether you have an apartment development in the southwest, for example, or in the mid to upper North Shore,” he says. And broadly speaking, with construction costs there is not going to be a huge variable between those projects. “But your drop in revenues might be very different.” Volz says the fall in off-the-plan pre-sales has added to developers’ woes. “It’s been progressively difficult from 2017, when we had the exit of the Chinese buyers in that time, then we had the prudential requirements changing for investors, so there’s been a slow unwinding of the pre-sale environment,” he says. “And then obviously, we had Covid on top of that. I think, as much as anything that’s had an impact on where DA-approved sites are at the moment.” GV Property’s Mercurio says historically, in about 80 per cent of DA-approved sales, the buyer will take the project in new direction. “The buyer will start fresh,” he says, citing the example of a 2405-sq-m corner site he has for sale in Harbourside Court, in Biggera Waters, a northern suburb of the Gold Coast. The site, with a northern view over the canal, is development-approved for 100 three-bedroom units across 13 levels. “It probably doesn’t work as a residential development in today’s market because of construction costs or depths in market, but it would work as a retirement vertical concept or as a built-to-rent.” Despite the increase in sales of shovel-ready sites, he remains bullish. “You know, there's definitely deals happening,” he says. “There’s buyers still in the market, and there's money still around ... so it’s certainly not a market that's in turmoil. “I think it’s a market that's just shaking off some feathers.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Good to Go: DA Approved Sites Flood Market

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