[+] In-House Construction ‘Not the Solution’

“There is no one building more product than us on the Coast.” It’s not a boast, just a statement of fact from Aniko Group chief executive George Mastrocostas. And if the group’s $1.5-billion Mermaid Beach masterplan is approved in the next few months it will swell the prolific developer’s pipeline closer to $3 billion. Aniko has wrapped up work on Athena Residences at Hope Island and moved one of its construction teams to put shovels to dirt on its $150-million Orama tower at Chevron Island last week. Formerly from Sydney, Mastrocostas has spent more than 20 years building the Gold Coast’s skyline and is one of the city’s biggest advocates. “I feel like I’m an adopted son of the Gold Coast,” he says. “It’s the best place on earth, why would you want to live anywhere else?” Navigating Gold Coast’s boom-bust cycles But it’s not just the golden beaches and bottomline returns spurring the developer. “We want to leave a legacy. I want to drive past our Mermaid Beach project in 20 or 30 years and think, ‘It still looks good’,” he says. “There’s a real sense of responsibility … I’ve told my team that we’re all responsible for delivering a legacy and we need to get it right.” ▲ Aniko Group's $1.5-billion Mermaid Beach masterplan is before the Gold Coast City Council. Of course getting it right in the Gold Coast’s boom-bust cycles is a matter of some alchemy and a good level of bravery. Mastrocostas acknowledges how tough it is out there in the industry, particularly in construction. Queensland is the most expensive state to build in and widely acknowledged as the badlands for southern builders looking for some northern exposure. In-house construction no easy feat Aniko Group is a vertically integrated builder-developer—but it’s no walk in the park, Mastrocostas warns. “It’s not easy running a construction arm of the business but it’s arguably the most critical to the business at the moment,” he says. “A lot of developers are scrambling to set up their own construction arms but it’s not that easy … I don’t think it’s the right solution. There’s more to it than just getting a site manager.” Mastrocostas says there is intellectual property and relationships with subcontractors and suppliers that are necessary in construction. He says it’s “almost a near impossibility” to break into construction now. Labour shortages have dogged the industry in Queensland particularly, but the slowdown in projects across the state could help unlock some of the labour constraints and push down prices. “Who would have thought it would be that Queensland was the most expensive state to develop in. Materials are a fixed price, concrete costs the same whether it’s in Sydney or Brisbane—what it really comes down to is shortage in the availability of labour,” Mastrocostas says. ▲ George Mastrocostas has called the Gold Coast home for more than two decades and wants to leave a legacy on the Glitter Strip. “The extent to which [construction] slows down will affect what adjustment we might see in the market. There should be more people available and we should see costs stabilise. There’s a general consensus that what’s happening in the market currently cannot continue. “There’s a ceiling in terms of revenue. “If you’re using a third-tier builder and paying $12,000 to $13,000 per sq m, you’re selling two bedroom apartments for more than $1.4 million. “There goes the market for where you could buy two-bedroom apartments for under $1 million.” Gap in apartment market is untouchable Even vertically integrated builder-developers such as Aniko Group are finding it impossible to get projects to stack at the more affordable end. “At the moment [no one] can build something for less than $10,000 per square metre, we’re not there and arguably won’t be back there for some time, if ever,” he says. “Prices need to rise. “There’s currently a gap in the market and if someone can find a way to deliver that $700,000 to $1 million apartment in a decent area you would have no issues selling it. But the issue is, can they deliver?” ▲ Aniko Group has sold 75 per cent of its Chevron Island tower, Orama, which it has just broken ground on. Aniko Group has built out more than $500 million worth of housing at Hope Island, changing the fabric of the community in the Gold Coast enclave. “It’s been very tough for the construction industry and we are proud that we are able to kick off these projects. “We will wrap up construction at Hope Island by mid-June. We have delivered just over $500 million of development, about 630 apartments. “Hope Island was an area that was abandoned post-GFC and we were one of the first ones who moved into that area.” The group’s latest project, Orama, at Chevron Island is a 102-apartment development that is already 75 per cent sold, netting more than $100 million in sales. Mastrocostas says they spent “longer than we had hoped” on the design of Orama and he feels it has paid dividends. “We wanted to ensure we were designing something that could be absorbed by the market and sales figures would indicate we got that right. “When we first started looking at this development site the only projects on Chevron Island were more basic, they didn’t have all the bells and whistles. “We wanted to find the right product for Chevron Island. But when that site came up on the market we grabbed it with two hands. “Most of the purchasers are from a 5-to-8km radius. People love the community feel in Chevron Island. My heritage is Greek and it’s like going into a little Greek village. It’s a little precinct, so it’s wonderful to be able to help build and contribute to that.” ▲ Aniko Group will complete construction of Hope Island's Athena Residences in the middle of next year. Mastrocostas says they were not waiting for pre-sales to flow through, it was a matter of finding a construction crew to start work on the site. “We were just completely maxed out in terms of construction resources, we were hoping to start mid-year this year but the delay didn’t affect our sales. “On the Gold Coast we are well-known and trusted. There is no one building more product than us on the Coast and this gives [us] credibility.” The developer is on the hunt for sites along the Glitter Strip and says he is regularly having deals come across his desk for sites that were “quietly on the market”. He says he is regularly approached by financiers and developers looking to do a joint venture “because they are trying to get out of their site”. “Sites that aren’t being advertised. But they’re still transacting for what they were 12 months ago, we’re not seeing price compression. “But we are a vertically integrated business, it would have to be a pretty good site for us to consider a JV. “For us, we’re quite conservative when it comes to land acquisition. We won’t buy it if we don’t get emotional.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] In-House Construction ‘Not the Solution’

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