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
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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
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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.
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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.
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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
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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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05 Mar

Revamped laws a double-edged sword

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A round of property law reforms are delivering good news for big landlords, but a mixed result for the big commercial agents. Photo: iStockCommercial property professionals are no longer required to hold a real estate agent’s licence for large property transactions under NSW government red tape reforms.
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The winds of change in this area have already blown through Queensland and Victoria and now NSW agents are facing a double-edged sword.

The changes, under an amendment to NSW’s Property, Stock and Business Agents Act, are aimed at

alleviating the costs and compliance paperwork for the vendors and also for the agents, who, if they complete the forms incorrectly, face losing commissions.

It comes at a time when larger vendors, of the ilk of real estate investment trusts, which own about 80 per cent of investment-grade properties in the country, are embarking on asset deals. For the larger acquisitions or disposals, most of them will probably still use an external, independent agent, but the same probably isn’t true for deals worth a lot less.

Under the Queensland law the thresholds are properties worth about $10 million and 10,000 square metres. In NSW, the exemptions are based on the principal/owner, whereas in Queensland they are based on the property or the parties for the relevant transaction/agency agreement.

According to Jodie Masson, partner at the property-exclusive law firm Massons, new exemptions to the act for commercial agents, which came into effect on  August 15, provided a windfall to large property owners but were a double-edged sword for large commercial agents.

Similar rules came into Victoria in early 2014.

“The new exemptions are great news for large property owners who manage, lease and sell their own assets via a separate, but related, licensed entity, which usually charges a fee to the owner,” Ms Masson said. “It means that those internally controlled agency entities no longer have the administrative burden of maintaining a real estate agent’s licence, including paying fees, required signage, managing trust accounts and holding personal indemnity insurance. It’s easy to understand why some large shopping centre owners have been pushing for this change for many years.

“On the one hand, large commercial real estate agencies will no longer need to ensure that they strictly comply with NSW agency law, particularly in the area of having compliant agency agreements, for their large clients,” Ms Masson said. “The courts have been brutal with real estate agents who do not have strictly compliant agency agreements, that is, signed at the right time, containing all of the prescribed terms in the right places, and signed and served properly.

“In a commercial property industry which is largely dependent on relationships, it makes sense to relax the strict requirements so that agents can collect the agreed commission without having to jump through hoops.”

However, Ms Masson said the downside for commercial real estate agents was that they would have to work harder to entice business away from those large corporate owners who manage, lease and sell their own assets.

“If large property owners can now easily internally manage their property management, leasing, acquisitions and disposals, there is now less incentive to outsource this previously troublesome role to an external licensed real estate agent,” Ms Masson said.

“However, there’s always a place for absolute experts and the large commercial agencies are well set up to provide excellent support and coverage for property owners.”

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05 Mar

Storage Wars: The billion-dollar business based on junk

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Penrith Auctions both sells and buys the contents of storage units, when the buyer has defaulted. Auctioneer Arron Caller holds a 1950s Golden Fleece petrol station sign. Photo: Peter RaeVery often it’s trash. But this time the “delinquent” storage unit contained a $37,000 stash worthy of a big reveal on the television reality show Storage Wars.
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“Lo and behold, there was a safe with five exquisite watches,” said Jason Lee*, the owner of Penrith City Auctions.

Mr Lee spotted the locked safe after buying the entire contents of the unit sight unseen. The owner, Lee was told, had defaulted because he had been deported for overstaying his visa.

Each watch was worth $7500. Another unit he bought contained the stock of a sex shop including thousands of “devices” in different colours, shapes and sizes.

As overall demand for storage has gone up, so too have complaints about unfair pricing and the seizure of goods for non-payment.

The number of unpaid storage units for auction on GraysOnline, for instance, has increased by 50 per cent, with around 50 “delinquent” auctioned each week. Bidding on units starts at $9, but can reach the thousands, driven by Storage Wars’ inspired buyers who are looking for treasure.

According to a report this month by IBISWorld, a research company, the storage industry’s 692 players generate $1.1 billion in revenue, resulting in profits of around 20 per cent. As rents and property prices go up, consumers are finding their stuff no longer fits in the smaller dwellings. E-commerce has also created a need for more storage for small online businesses, often operated at home.

No one knows exactly how many storage units exist in Australia, but at best guess there are as many as 700,000 individual units. National Storage, which has 8.5 per cent of the market has 59,000 units, said a spokeswoman for the company.

Occasionally Mr Lee will find himself bidding against a frantic owner, who wants to recover the contents of their seized unit. “You can tell when they bid, a storage unit worth only $500 (and the owner) will bid $2000.”

Auction houses like Mr Lee’s are also contracted by local storage companies to sell and clear out the contents of delinquent units from Sydney sites.

NSW Fair Trading has received 24 complaints this year, mostly relating to fees, charges and loss and damage of property.  Three concerned the seizure or sale of storage unit contents.

IT consultant Laszlo Molnar complained about unfair pricing on ProductReview上海m.au about National Storage’s policy of increasing prices every nine months on the unit he rented to store furniture for his daughter.

“Every nine months I got an increase of between 12 and 18 per cent. And when I asked National Storage, they said it was their policy to do a rental increase. It was above any rate of inflation or CPI.”

You never know what you are going to find in a delinquent storage unit. Photo: Peter Rae

When the price of the 1.8 metre square storage unit in Melbourne, which he originally rented for $105 a month, was about to hit $150, he decided that was enough and moved out. He said the manager of his storage centre  had written to him that the price increases were company policy, handed down from head office.

A spokeswoman for National Storage told Fairfax Media that price increases were determined on a supply and demand basis, akin to hotel or airline industry pricing. Different centres have different pricing structures, she said.

Mr Lee said he was increasingly competing against consumers who have watched the American television show Storage Wars and believe that they will find a jackpot by bidding on a delinquent unit on GraysOnline.

“They’ve watched the TV show, and believe they will buy a unit or two at auction and hit the jackpot by finding a five carat diamond ring. But you’ve got more luck (of getting rich) on the blackjack table,” said Mr Lee. His auction house Penrithcityauctions上海m.au specialises in selling deceased estates and unsold units.

Mostly Mr Lee finds “decrepit old stuff” in amongst the abandoned household goods, motorbikes, hi-fi units and suitcases. GraysOnline advertised a unit this week where the highlight was a DVD of the 1989 Julia Robert’ movie, Steel Magnolias. 

Storage units are a billion-dollar business and profitable, generating shows like Storage Wars in the US and shown on television here. But many people default on these units, and the contents are sold online and at weekly auctions by companies like Penrith City Auctions. Photo: Peter Rae

National Storage’s spokeswoman said before the delinquent unit went to auction, the goods are catalogued and lodged with GraysOnline for sale. “Items are detailed and we don’t sell units as unseen lots as they do on Storage Wars.”

The company didn’t sell personal items (eg documents) and these are held for collection by the customer.

“We are not obliged to do this but feel this is the right thing to do in these circumstances,” she said. 

* Lee is not his real last name.

Storage by numbers  Industry revenue $1.1 billion Industry profit $214.8 Number of businesses 692

One of the treasures sourced from an unpaid storage unit, and up for auction at Penrith City Auctions. Photo: Peter Rae

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05 Mar

ASX to start flat ahead of retail, capex data as US rates remain in focus

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Local data returns to the spotlight this week for Australian investors emerging from reporting season, while globally markets wait on employment data from the US to validate commentary from US Federal Reserve chair Janet Yellen.
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Markets last week traded in quiet anticipation of news from the Fed’s annual meeting at Jackson Hole, Wyoming, including the hotly anticipated speech from Dr Yellen, which disappointed interest rate hawks on Friday night.

While leaving the option to raise interest rates as early as September open, depending on employment data due on Friday, Dr Yellen also pointed to stimulus tools available should conditions deteriorate, leaving the impression that monetary policy was likely to remain accommodative in the long term.

Fed fund futures moved, albeit not dramatically, from pricing around a 32 per cent chance of a hike in September to 42 per cent. Asian region markets will have a chance to respond to the commentary, in the wake of the US dollar which surged higher, sending the Australian dollar tumbling 1.5 per cent from a high of US76.8¢ to as low as US75.6¢.

The Australian dollar clawed back some ground, sitting at US76¢ flat at the weekend, while sharemarket futures point to a slightly weaker open on Monday morning.

“While the move towards another Fed rate hike will likely cause bouts of consternation in investment markets I don’t see the same degree of uncertainty that we saw around last year’s Fed rate hike,” AMP Capital chief economist Shane Oliver said.

“It’s clear from the Fed’s actions this year that it is aware of global risks, the impact of its own actions on those risks and any potential blowback to the US economy and of the impact of a rising US dollar in doing some of its work for it and so acting as a limitation on how much it can hike.”

While investors will be awaiting Friday’s non-farm payrolls for the US for a strengthening case for a rate rise at the Fed’s meeting on September 26-27, as well as commentary from four Fed speakers throughout the week, there is plenty of action to keep local traders occupied.

Building approvals data is due on Tuesday, followed by retail sales for July and June-quarter business investment data due on Thursday.

“Industry reports, including those from the current reporting season have been mixed [regarding retail sales],” National Australia Bank senior economist David de Garis said.

“One major market chain had a strike affecting distribution in Melbourne from mid-July, possibly hampering sales through its outlets. Still quite difficult trading conditions were also reported by department stores in July with David Jones having July as an additional clearance month.”

Consensus forecasts expect growth to sit at 0.3 per cent month on month, a slight improvement on June’s disappointing 0.1 per cent figure.

As for second-quarter capex, consensus estimates from Bloomberg expect a contraction of 4.1 per cent for the quarter, following a trend of declines on the previous quarter’s 5.2 per cent fall. The release from the Australian Bureau of Statistics also includes expectations for the 2017 financial year. Mr de Garis said “some normal seasonal upgrade on early tentative estimates is usually evident, and NAB expects some upward revision on this basis from $89.2 billion to $97.6 billion for spending”.

Other data points to watch include the purchasing managers’ indices manufacturing gauges from China, the eurozone, Britain and the US all on Thursday.

This week also marks the tail end of company reporting season, with only a few major companies left to report, including Harvey Norman, Ramsay Health Care and Adelaide Brighton.

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05 Mar

Americans pay millions to whistleblower at BHP; we hound them out of their jobs

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Dr Kirstin Ferguson is a director at Thiess’ parent company, Leighton Holdings (now named CIMIC), and responsible for company ethics. Photo: YouTube The US paid for evidence of alleged bribery by BHP Billiton.
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Separate to the BHP Billiton case, a whistleblower claims he was victimised because of disclosures he made about alleged corruption at mining services giant Thiess. Photo: Supplied

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The US government paid a huge bounty – nearly $5 million – to a former employee of Australian mining giant BHP Billiton in a case that exposes the weakness of Australia’s whistleblower regime.

In Australia, those who flag corruption inside companies receive limited or no protection and are often sacked or mistreated, while in the United States, which paid for evidence that exposed alleged bribery by BHP Billiton, whistleblowers are encouraged to come forward.

News of the bounty comes as the new, more powerful crossbench in Federal Parliament shapes up to pressure the big parties to change Australia’s whistleblower protection laws.

The calls for reform are being made as Fairfax Media can reveal new details of another whistleblower case that suggests serious ethical failings by a top Australian businesswoman and ABC board member, Kirstin Ferguson.

A Fair Work Commission complaint filed by the whistleblower alleges he was “victimised as a result of the disclosures” he made to Dr Ferguson about alleged corruption at mining services giant Thiess. Dr Ferguson is a director at Thiess’ parent company, Leighton Holdings (now named CIMIC), and is responsible for company ethics as ethics committee chairwoman.

Dr Ferguson declined to comment on detailed questions sent to her by Fairfax Media.

Key MPs Nick Xenophon, Jacqui Lambie and Andrew Wilkie, as well as the Greens and shadow attorney-general Mark Dreyfus have all said they will push in Parliament for stronger whistleblower laws to encourage reporting of corporate corruption.

Australian Securities and Investments Commission senior executive Warren Day also said he backed calls for major whistleblower reforms, saying new legislation and the prospect of compensation should be considered.

Minister for Financial Services Kelly O’Dwyer said the government was looking at strengthening Australia’s corporate whistleblower regime.

Huge bounty

In May, the US corporate watchdog, the Securities and Exchange Commission, revealed it would pay a bounty “to a company employee whose tip bolstered an ongoing investigation with additional evidence of wrongdoing”.

Legal sources have confirmed that the whistleblower was a BHP Billiton insider, paid US$3.75 million (about $4.96 million). The former employee provided detailed information to US investigators about the mining firm’s activities overseas several years ago.

The allegations remain the subject of an active Australian Federal Police bribery investigation. To protect their identity, Fairfax Media is not revealing evidence of the conduct the whistleblower exposed.

It is the first time an employee of an Australian company has received a US whistleblower bounty. Under the US Sarbanes-Oxley Act, the SEC can reward whistleblowers by giving them a cut of a fine extracted from a company, with payouts often reaching many millions of dollars.

In May 2015, BHP Billiton agreed to pay $US25 million to the SEC to settle an inquiry into trips to the Beijing Olympics that the company gave to government officials. The officials represented countries where the miner was operating, and where it was sometimes seeking government permits.

BHP Billiton said in a statement that, during that inquiry, the SEC had made no findings of bribery or corrupt intent against the company, and that the US Department of Justice had investigated but took no action.

“The SEC recognised BHP Billiton’s ‘significant cooperation’ throughout the investigation and its ‘significant remedial efforts’,” the company said in a statement.

The company said it was not aware of the involvement of any whistleblower as part of either investigation.

“We respect and fully support protections for all whistleblowers, and the importance of providing confidential avenues for reporting,” the statement said.

Australian whistleblower persecuted

Leaked company and court documents reveal a whistleblower from mining services giant Thiess asked Dr Ferguson to protect him in 2014 in her capacity as director and chair of the ethics committee at Leighton Holdings, Thiess’ parent company.

On July 25 that year, the whistleblower allegedly told Dr Ferguson of Thiess’ involvement in an alleged bribery conspiracy in India. He had told her the company had failed to disclose the allegations to the stock market as required under law.

Records of conversations and text messages between Dr Ferguson and the whistleblower reveal she was told by the whistleblower that he had uncovered “the biggest ethical issue this company [Thiess] has and would be the biggest in Australia”.

“My role is under serious threat,” the whistleblower told Dr Ferguson on July 25, 2014.

Twelve days later, the man was sacked, and forced to go on “garden leave” by Leighton, legal documents say.

Forty-eight hours after that, Dr Ferguson texted the whistleblower and said she was “following up” on his allegations. “I … will be sure to call you when I am done,” her text states.

In response, the whistleblower texted Dr Ferguson that he was being sacked and needed urgent help: “This matter requires urgent escalation … Kirstin, when can I expect to hear from you?”

She did not contact him back.

A formal complaint filed with Leighton Holdings and lodged in the Fair Work Commission states that as a result of whistleblowing to Dr Ferguson, “he was victimised”.

The whistleblower had earlier tried to get the company to fully investigate and respond to allegations of Thiess’ involvement in bribery in India in connection to a multibillion-dollar coal deal. The whistleblower’s complaint details a subsequent “cover-up” of information from the market by Leighton Holdings, which has been renamed CIMIC. The company has never passed the matters raised by the whistleblower to corporate watchdog ASIC or the federal police.

CIMIC and the whistleblower confidentially settled the Fair Work Commission case.

Reform needed

ASIC executive Warren Day believes new whistleblowing laws could provide far greater clarity and protection for employees who wanted to report a range of misconduct, spanning financial crime and environmental or health and safety breaches.

Mr Day says there was merit in compensating whistleblowers, although he cautioned against aspects of the US scheme.

Senator Nick Xenophon has told Fairfax Media that “whistleblowers in the US get rewarded and protected, but here they get punished and ruined”.

Andrew Wilkie, who was recently elected as an independent MP in Tasmania, said Australia had a cultural problem in which whistleblowers were scorned as untrustworthy dobbers, or unhinged: “In the US whistleblowers are celebrated, but in Australia they’re often vilified,” he said.

“Greater whistleblower protection is one of the building blocks of a healthy democracy and … of a healthy corporate culture.”

Senator Lambie, who has taken up the cause of a Defence Department whistleblower, said she wanted “world’s best practice” whistleblower laws which would “strengthen our democracy, prevent and uncover official corruption, decrease government waste, save lives, money and prevent damage to our environment”.

Shadow attorney-general Mark Dreyfus said private sector employees should enjoy the same whistleblower protection as people in the public sector because their information is “just as valuable to our community, and they should not be treated differently under the law”.

“Recently a string of brave private sector whistleblowers have come forward with valuable information, including those who have exposed wrongdoing in our banking sector. They deserve our protection,” Mr Dreyfus said.

Minister Kelly O’Dwyer said that, as it looked to strengthen legislation, the government would “follow usual process, and will consult publicly”.

She said in a speech in July that the government would consider ways to “encourage, protect and reward whistle-blowers whose information reveals artificial tax structures and misconduct”.

“Big business will have to get their house in order, or suffer the consequences,” she said at the time.

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05 Mar

Australian writers’ festival season in full bloom

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Erica Jong will be at Ubud Writers & Readers Festival in October. Photo: Bill O’Leary/Washington PostA FEAST OF FESTIVALS
Shanghai night field

Writers’ festival season is well underway wherever you may be in the country with the inaugural Canberra Writers Festival on this weekend (canberrawritersfestival上海m.au) and Melbourne Writers Festival (mwf上海.au) sprawling over this weekend and next. Closer to home, Sydney Jewish Writers Festival opens on Saturday evening at Bondi Pavilion, continues all day Sunday at Waverley Library (sjwf上海.au). I will be part of the launch of Rebellious Daughters, an anthology of memoirs by Australian women, along with editors Maria Katsonis and Lee Kofman, and another contributor, Leah Kaminsky, who will also join me with novelist Steven Amsterdam and Rabbi David Freeman in a session called “We Need to Talk about Dying”. Other speakers include David Gonski, Arnold Zable, Mireille Juchau and in the children’s program Anna and Barbara Feinberg, the mother and daughter who for 20 years have created the popular Tashi books.

The Festival of Dangerous Ideas at Sydney Opera House on September 3-4 (fodi.sydneyoperahouse上海m) features talks by speakers ranging from Alexei Sayle to Andrew Bolt on politics, asylum seekers, fishing, the arts, gender, drugs, sport, sex addiction, suicide and many more topics. Events continue through September, if you want a weekend away, from the large Brisbane Writers Festival on September 7-11 (uplit上海m.au) to tiny gatherings in beautiful locations – Batemans Bay Writers Festival (batemansbaywritersfestival上海m) on September 9-11 and the St Albans Writers Festival on Septembers 16-18 (stalbanswritersfestival上海m.au). You’ll find some of the same writers on the circuit, from international names such as Lionel Shriver and Yann Martel to locals Meg and Tom Keneally, Rod Jones, Nick Earls, Suzanne Leal, George Megalogenis, Tim Fischer and Jane Caro. And each festival has its exclusive surprises. NO FEAR OF SAILING FOR JONG

You might wonder what it’s like to travel with feminist Erica Jong, who made her name with the 1973 erotic novel Fear of Flying. You can find out at the Ubud Writers Festival, which has just released its program for October 26-30. Jong’s bestseller was more about changing attitudes to sex than flying, coining the term “zipless f—“, though it opened with 117 psychoanalysts on a flight to Vienna and a narrator fearful of hijacking. The entertaining Jong, whose latest book is Fear of Dying, will be among 160 writers in Ubud. She will also join 10 guests on a six-day post-festival cruise from Flores to Komodo, along with festival director and cook Janet DeNeefe. Having taken this cruise in its first year with Indian writer Amitav Ghosh and his American wife Deborah Baker, I recommend its combination of sightseeing, cooking, dining and discussion of books. See ubudwritersfestival上海m and seatrekbali上海m. SUPPORT INDIGENOUS LITERACY

Singers Justine Clarke, Josh Pyke and Deborah Cheetham, and writers Andy Griffiths, Richard Flanagan and Alison Lester will join school children from remote communities to celebrate Indigenous Literacy Day at the Sydney Opera House on September 7. Clarke and Pyke will perform a new song, Words Make the World Go Around. Visiting children from Tjuntjuntjara, Mt Margaret and Menzies schools will read their stories from The Goanna Was Hungry, a book they have written and illustrated with Ann James and Sally Morgan. All children can take part in The Great Book Swap at the Opera House or at their schools by taking along a book and a gold coin in support of the Indigenous Literacy Foundation, which has provided 150,000 free books to communities across Australia. See ilf上海.au and greatbookswap上海.au to register.

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