Archive for April, 2019
07 Apr

IOOF pays $20.75m for slice of ex-GMH factory, Dandenong South

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IOOF’s latest purchase in Dandenong South. Photo: Supplied Map Coffee founder Pitzy Folk is relocating his central office to Windsor. Photo: Eddie Jim EJZ

An artist’s impression of the controversial Marvella Heights apartment project in Ballarat. Photo: Supplied

IOOF Investment Management is paying $20.75 million for a high-profile building within Cbus Property’s Estate One – an office and industrial park replacing Dandenong South’s iconic General Motors Holden plant, which operated at the address for some 40 years until the 1990s.

In an off-market deal struck on a 7 per cent yield, the asset manager is acquiring 45 Assembly Drive – a four-level, 4432-square-metre office completed by the Hacer Group in 2014.

Three major tenants, including the Country Fire Authority, with lease naming rights, occupy more than 90 per cent of the building which also includes a 213-bay basement car park.

IOOF senior portfolio manager Simon Gross told BusinessDay it will build another commercial asset on a vacant part of the super-sized, 9548-square-metre block.

“We were attracted by the significant lot size, the long eight-year WALE [Weighted Average Lease Expiry], the stunning presentation … and the high quality of three flagship tenants,” Mr Gross said of the asset, earmarked for IOOF’s direct property portfolio.

Colliers International director Peter Bremner was the marketing agent.

Cbus Property CEO Adrian Pozzo said the sale is part of an ongoing strategy to divest parts of Estate One once value was maximised.

Cbus paid Phileo Australia $136.5 million for the 46-hectare former car plant, at 81-125 Princes Highway, in 2007.

Phileo, which paid GMH $22.5 million 10 years earlier, repurposed the factory as an exclusive industrial park, but sold out of the development opportunity after constructing only a handful of new buildings. Its sale to Cbus included 12 hectares of undeveloped land and about 90,000 square metres of ageing GMH-related factories.

After producing more than 4 million vehicles, GMH closed the factory 25 years ago – the last model it produced being the Nova, and Toyota Corolla-badged twin. The General Motors railway station, which the car company paid to construct in 1956, closed in 2004.

Modern Bendigo office sells

A near new Bendigo office leased to the Department of Education and Early Childhood Development, with options, until 2029, has sold to an investor for just over $10 million.

The three-storey, 1957-square-metre asset at 7-15 McLaren Street offers depreciation benefits as well as an annual rental return of more than $710,000, next year, from the next lease period, starting in December.

The NABERS 5.5-star energy rated building sits on a 1924-square-metre block with 44 on-site car parks.

Burgess Rawson’s Jamie Perlinger and Shaun Venables, with Tweed Sutherland First National’s Craig Tweed and Tom Harrop, closed an expressions of interest campaign in mid-July.

Investor flipping in Ballarat

An investor is flipping a Ballarat site after obtaining a controversial permit to build flats – a practice which has recently proven profitable for Melbourne land dealers.

The opportunity to build Marvella Heights on a long-vacant central site for years owned by the state education department, is asking about $3.5 million.

At 29 St Pauls Way, Bakery Hill, the 9608-square-metre block was recently permitted to make way for 102 dwellings – 77 of these apartments within three buildings, the tallest rising four levels.

To the surprise of locals, the land fell into private hands nearly two years ago, after the state government sold it to BEST Employment, which on-sold it to the current owner. Gross Waddell’s Andrew Waddell and Andrew Thorburn have the listing.

Spotswood activity centre proposed

Spotswood may soon be hard to miss to commuters taking the West Gate Bridge, with the owner of a large industrial site near the train station advertising plans to build a neighbourhood activity centre with 346 dwellings in buildings rising between five and nine storeys.

The plan for 31-69 McLister Street also includes a medical centre, bottle shop and supermarket with a cafe, chemist and specialty retail. The permit request seeks for a reduction in the statutory car parking requirements for the land, seven kilometres west of town.

Tick for city’s first Skypark

The divide between the south-west edge of the CBD and Lang Walker’s multibillion Collins Square project, in Docklands, is set to be filled after planning minister Richard Wynne approved Lendlease’s proposed Melbourne Quarter village this week.

The $2 billion plan includes about 1690 dwellings in three skyscrapers, set to rise over six years in and around where the Bunjil sculpture was erected in 2002.

Half of the 2.5-hectare site is earmarked to become public space, and will include Melbourne’s first Skypark opposite the Southern Cross train station west of The Age office, Media House.

Lendlease secured developments rights over the Batman Hill airspace between Collins and Flinders streets, in 2013. The precinct is where John Batman, one of Melbourne’s founders, built the home he lived until his death in 1839.

In 1998, the Grollo Tower – a landmark 560-metre super-scraper (which replaced an earlier 678-metre concept) was rejected for development in this pocket. Bruno Grollo, who proposed that controversial structure, went on to build the 297-metre Eureka Tower in Southbank, currently Melbourne’s tallest building.

Folk buys in Windsor with taxpayer funds

Fresh from banking $19 million of taxpayer dollars selling his Fishermans Bend headquarters to the government, businessman Pitzy Folk will relocate his central office a few kilometres south, to Windsor, after buying a historic building for years owner-occupied by Telstra as part of an exchange.

The former hotelier and restaurateur turned coffee roaster and director of boutique soft drink chain, CAPI, is paying about $6.5 million for 168 Peel Street, a red-brick building opposite the Windsor train station, five kilometres south of the CBD.

On an 817-square-metre block, the vacant 1387-square-metre structure was marketed by CBRE’s Tom Tuxworth, David Minty and Josh Rutman, with Colliers International’s Peter Bremner and Jeremy Gruzewski.

The pre-emptive rezoning of Fishermans Bend by the former Liberal planning minister Matthew Guy prompted a huge spike in land values and caused major planning headaches later when the government was forced to buy-back sites at inflated values to use as public open space.

Mr Folk’s CAPI warehouse at 2-4 Buckhurst Street, South Melbourne, was one of those parcels.

The government delivered a windfall to Mr Folk, who paid $4.4 million for the 4000-square-metre block in 2008, when it purchased the site for $19 million last year to use as a park.

Mr Folk had previously lodged plans to replace the CAPI site with a much more profitable mixed-use village containing two apartment buildings.

The Napthine government’s botched rezoning increased the buy-back costs of public open space by as much as $340 million, some estimates suggest.

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07 Apr

NBN needs another $20 billion of public money to finish rollout

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In the pipeline: NBN won’t be profitable until 2022. Photo: Glenn Hunt NBN chief executive Bill Morrow. Photo: Supplied

The federal government will have to plow another $20 billion into the national broadband network as it battles higher than expected costs next year.

And NBN Co has been forced to change plans for 1.5 million households to avoid a potential cost blowout.

Originally designed as 93 per cent fibre network, NBN was changed by the Coalition government to incorporate existing infrastructure to save time and money. However, it now appears fewer people are signing up to the NBN than expected and that the Coalition under-estimated the costs of connecting old cables.

While there should be 8.1 million active customers each providing about $52 of monthly revenues by 2020, the government-owned business won’t be profitable until 2022.

The Finance and Communications Ministers have released a new Statement of Expectations on Friday removing a requirement NBN Co build the network “within the constraints of a public equity capital limit of $29.5 billion”.

This limit will be reached next year and the government will have to provide a further $20 billion for total contribution of $48.6 billion by 2020 as NBN Co is unlikely to be able to borrow money on its own.

However, the government is committed to funding the project.

“The government has not yet determined what form this support would take if it were required and continues to assess a number of options to ensure the best possible value for taxpayers is achieved,” Finance Minister Mathias Cormann said on Friday.

A new corporate plan on Friday revealed 55 per cent of premises would now get fibre to the node, 27 per cent cable, and 21 per cent fibre (of which nearly half are yet-to-be-built new housing).

The company is meeting rollout forecasts it set itself last year.

“The NBN rollout is on track and on budget, having now built more than a quarter of the network,” a Communications Minister Mitch Fifield spokeswoman said on Friday.

However, NBN Co underestimated the cost of using existing hybrid-fibre coaxial [HFC] cables laid by Telstra and Optus in the 1990s. Last year it calculated an average cost of $1800 per house. But detailed field work discovered the cost was actually $2300.

“In April we signed a delivery agreement with Telstra utilising their vast knowledge and experience in hybrid fibre coaxial [HFC]. We have learned more about the complexity and costs of the HFC rollout,” a spokeswoman said on Friday.

NBN also discovered it was completely uneconomical to connect 1.5 million of the 4 million premises within the HFC footprint. Those premises will now be connected using fibre-to-the-node technology [FTTN], which may have slower download speeds.

In 2013 the Coalition estimated FTTN connections would cost about $900 per premise and this was raised to $1997 in a 2014 strategic review, and raised again in 2015 to about $2300.

The Coalition also estimated $29.5 billion of public money would last until NBN could borrow on its own, but the faster FTTN roll out means NBN Co is running out of money quicker than expected.

Earlier this week Australian Federal Police raided offices of Labor Senator Stephen Conroy looking for the source of leaks from NBN Co.

A spokeswoman for Senator Fifield said: “The Australian Federal Police operates independently from government”.

Meanwhile Labor’s Communications spokeswoman Michelle Rowland said the Coalition had “grossly underestimated the cost of having different technologies”.

She expects the operating costs for a network with FTTN and HFC to have much higher operating costs than the majority-fibre network planned by Labor.

She also claims a Labor-run NBN Co would have been able to borrow money already, saying the “internal rate of return would have been sufficient for us to be able to finance any shortfall”.

In 2010 Labor predicted NBN Co would start borrowing money in 2015. In fact, Labor expected NBN Co to get 33 per cent of its funding from debt markets by 2021 with an internal return of return of up to 8.8 per cent. On Friday NBN Co chief executive Bill Morrow revealed the current rate of return was 3.7 per cent.

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07 Apr

Hotel investment welcomes higher visitations

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The Radisson Sydney hotel has been upgraded under the Blu brand. Photo: Mark HeriotHotel investment is tipped to escalate in the coming year as investors seek to take advantage of the growth in overseas and domestic tourism in a market that is deemed under-supplied.

Development will also increase as operators look to introduce new brands to the sector as well as upgrade existing sites to cater for the up-and-coming traveller that expects technology to be part of the standard room rate.

The owners of the Radisson chain, Carlson Rezidor​ has recently completed an upgrade of its Radisson Blu brand in its Sydney, O’Connell Street property and is looking for new sites for the more “agile” Radisson RED brand.

Carlson Rezidor has been in takeover talks with conglomerate HNA Group, which consists of six core areas of business, aviation, holdings, tourism, capital, logistics and eco-technology, with annual revenue of US$25.6 billion.

The HNA Group is expected to acquire the hotel group by the end of 2016.

Thorsten Kirschke​, president of Carlson Rezidor Asia Pacific said the group has significant growth ambitions for Australia and New Zealand and the deal will ensure new levels of investment across the region. Also, significant plans are being formulated to make the group’s hotel brands more contemporary and relevant to better meet changing consumer tastes.

He said the Radisson RED brand is proving an interesting investment proposition for wealthy Chinese families who want to pass on some of the wealth to the next generation through hotel ownership.

The brand offers a range of communal areas with wifi connectivity and a bar/lounge where guests can interact as opposed to a quieter, more traditional hotel bar/lobby area.

On a recent trip to Sydney Mr Thorsten said he believes Australia remains a highly compelling hospitality market given the record occupancy rates and significant shortage in room supply.

“In addition, hotel companies can no longer look at just the hub and spoke structure in the ‘Big 5’ Australian anchor markets,” he said.

“Carlson Rezidor has noticed 80 per cent of Australian hotel inventory is small to mid-scale hotels.

This positive outlook has been reinforced by the latest Deloitte Access Economics Tourism and Hotel Market Outlook, which has identified that growth in leisure travel to Australia has seen international visitor numbers surge 10 per cent in the year ended June 2016.

That was the fastest rate of growth since the mid-1990s. Australians’ desire for “staycation” has also increased considerably.

According to the report, in the past year, international visitor expenditure has grown by 17.6 per cent, more than double the 7.9 per cent average of the past five years. At the same time, the number of Australians travelling domestically is growing at its fastest pace since formal records began in 1998 (7.6 per cent).

Lachlan Smirl​, Deloitte Access Economics partner, said the growth tourism is posting – and the impact that’s having on activity across the economy – is a very clear sign the transition that needs to take place and its contribution to the Australian economy is occurring. A three-fold out-pacing of growth across the economy is no mean feat, Mr Smirl said.

“What is remarkable about the tourism growth we are observing is that it is being achieved against a relatively soft economic backdrop – both internationally and here in Australia. Yes, the Australian dollar remains relatively favourable, and the sustained growth of the middle class in Asia continues to buoy international travel. But as income growth in China slows, travel to Australia is in fact accelerating. And this pattern is observable across a number of markets.”

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07 Apr

Sydney fringe office markets in high demand

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An artist’s impression of the new Commonwealth Bank building at the Australian Technology Park, where Centuria has an interest. Photo: SuppliedMetropolitan office markets are moving in on their city counterparts as the hot ticket in town for investment dollars.

This has been emphasised by the hotly contended battle for the listed GPT Metro Office Fund by Growthpoint Properties, which has now crossed the 50.1 per cent threshold and declared the offer unconditional.

Once completed it will increase Growthpoint’s presence in the suburban office market by a further six, high-quality office towers in Sydney, Melbourne and Brisbane.

Growthpoint reported a strong full-year net profit of $224.2 million, which was down 20.8 per cent but included a range of one-off property valuations.

The more accurate distributable income was 21.9¢ per security, which was a 3.3 per cent gain on the 2016 year, and the annual distribution was 20.5¢ per security, payable on August 31.

Growthpoint chief executive Tim  Collyer said the group had enjoyed office leasing success, namely the lease to Country Road/David Jones for new headquarters over 23,000 square metres at Buildings 1 and 2, 572 Swan Street, Richmond, Melbourne, for an average lease term of 14.5 years.

The rival bidder for the GPT Metro Fund, Centuria Capital, which still has a 16 per cent stake in the fund, has also focused on the metropolitan markets and also unveiled solid results for the year of $10.4 million in net profit, a rise of 65 per cent. It was at the upper end of guidance provided to the market in December and the 2016 fully franked dividend was 5.25¢ per share.

John McBain, Centuria’s chief executive said funds under management increased 21 per cent from $1.6 billion to $1.9 billion and unlisted property fund acquisitions totalled $265 million. The listed Centuria Metropolitan REIT portfolio book increased 9.3 per cent to $400 million with distributions on forecast.

Mr McBain said during the past year the group has boosted its suburban office portfolio with the acquisitions of interest in the Australian Technology Park for $104 million, a 50 per cent interest in 203 Pacific Highway, St Leonards, for $43 million and a 50 per cent interest in 8 Central Avenue, Redfern, for $109 million and the acquisition of The Zenith complex at Chatswood for $280 million.

According to Savills, Sydney’s fringe office markets have recorded their strongest vacancy rates in more than a decade as the nation’s key capital city markets continue their climb out of double-digit vacancy and inflated incentives.

The falling vacancy is driving growth in net effective rents and with the NSW government’s announcement of registered projects totalling $390 million in Parramatta and Winten Property Group’s acquisition of a development site at 1 Denison St, North Sydney, developers are taking notice.

According to Savills senior analyst research & consultancy Houssam Yakzan​, average prime net face rents have increased by around 8 per cent in north shore markets and 7 per cent in Parramatta, with corresponding falls in incentives.

The combined north shore vacancy, including North Sydney, Crows Nest/St Leonards, Chatswood and Macquarie Park-North Ryde stands at 7.2 per cent, the lowest since the 5.3 per cent figure recorded in 2001.

Savills director office leasing, Simon Van Grootel​, said while there was no doubt the Sydney non-CBD office markets had picked up over the past 12 to 18 months, withdrawals for the compulsory metro rail acquisitions, residential and hotel conversion, and the lack of new supply, were key contributors to the lower vacancy rates.

“That has seen rental growth and incentives decline and those factors along with continued withdrawals and continued falls in vacancy are going to drive new construction but in the current market, that is likely to require pre-commitment,” Mr Van Grootel said.

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07 Apr

Stock shortage fires up off-market deals

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128-130 Rothschild Ave, Rosebery. Photo: supplied Three adjacent commercial terraces at 247, 249 & 251 Bronte Road, Waverley, are being sold in stock-starved east Sydney. Photo: supplied

The lack of supply for investment-grade properties has led to more vendors going off-market to achieve strong results.

Unsolicited advances, where owners get a knock on the door, are now becoming prevalent and also allowing agents to tap into their databases to match a buyer with a seller.

While savvy investors are not willing to pay over the odds, they are nonetheless keen to look for off-market deals to get a foothold into the safe haven bricks and mortar sector.

One of the latest examples involves 128-130 Rothschild Ave, Rosebery, a four-level commercial building that  is being offered through CBRE’s Sydney capital markets  associate director Tony Braham​ and Property Partnership Australia’s director sales & leasing Stephen Bowrey​.

Mr Braham said the off-market expressions of interest campaign has already attracted significant buyer interest.

“In an extremely stock-starved market, we’re finding that we can achieve great results for our clients without the need for on-market campaigns,” Mr Braham said.

According to the agents, the Rosebery building has development potential, subject to relevant planning approvals.

Mr Bowrey said the ongoing regeneration of the Rosebery area and the property’s development potential had underpinned strong interest from developers and land bankers.

Mr Braham added that Sydney’s east is also underpinned by the falling interest rates, record low yields and limited stock on the market, which is contributing to increased buyer competition and rising property values.

Demonstrating this trend, Mr Braham has recently been appointed to sell a long-term family holding of three adjacent commercial terraces at 247, 249 & 251 Bronte Road, Waverley.

“With a historically low level of listings currently on market, this retail/commercial offering in the trendy but tightly held Charing Cross/Queens Park shopping strip represents a major generational change in property ownership in Sydney, with many families now considering the sale of their long-term property holdings,” Mr Braham said.

The 500 sq m amalgamated site has been held by the same family since the 1950s, previously housing the retail and manufacturing arm of the family’s children’s wear clothing manufacturing business Ista Fashions.

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