Issue 37 | The Property Development Review

Welcome to Issue 37 of The Property Development Review, exclusively for agents, developers and investors.

ISSUE NUMBER 37

EXCLUSIVELY FOR PROPERTY DEVELOPERS, INVESTORS & AGENTS

JOHN MCGRATH

LISTINGS The best and latest commercial and development opportunities in Australia.

INTERVIEWS We speak with Australia’s best business leaders.

ANALYSIS Unique perspectives from the deal-makers on the ground.

Commercial investment just got personal.

We’re the commercial investment property platform that keeps investors and agents on the same page, for once. Here you’ll find smart technology, enhanced listings, and plenty of off-street parking. And while we may be the new kids on the block, we know all the old tricks — which is why we never use them. If you’re an investor , we help you skip the scroll with our granular search tool, displaying your ideal investment with only a few clicks. Plus due diligence tools, yield calculators, property summary reports, and floor-to-ceiling windows, of course. If you’re an agent , we help you skip the small talk with our in-house media capabilities to enhance your campaign’s vi s ibility and put it in front of interested buyers. Not to mention our data-room capability helps you track your listings, seeking engagement in real-time. Whichever side of the wall you’re on, we make investing in commercial property easier, clearer, and personal. It’s about time someone did.

Ready to inspect, invest, or just take a look around? V i s it commercialready.com.au

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THE PROPERTY DEVELOPMENT REVIEW

FROM THE CEO

“PACE YOURSELF: NOT FOR SHORT TERM GOALS, BUT FOR AN INFINITE GAME.”

EDITOR IN CHIEF Frank Materia frank@ readymedia.com.au IN-HOUSE WRITERS Sandra Loguidice Callum Hofler ADVERTISING OPPORTUNITIES jamie@ readymedia.com.au PROPERTY LISTING ENQUIRIES info@ readymedia.com.au EDITORIAL ENQUIRIES editor@ readymedia.com.au CONTACT Ready Media Group Head Office Levels 3, 4, & 5 161 Buckhurst St South Melbourne VIC 3205 03 9631 5476 info@ readymedia.com.au

Are you a finite player or an infinite player? Do you play to defeat? Or do you play to improve your standing amongst your competitors? Do you focus on short term wins and profits? Or do you pace yourself, and work towards corporate strength and endurance to stay in the game indefinitely? These are differences between finite and infinite players in business, and an infinite player will outlive a finite one every time. They equip themselves for long-term success rather than short term victories and are led by courageous people with loyal, trusting teams of strong capability. As we at Ready Media Group continue to play ‘infinitely’, we welcome yet another key addition to our team, Head of Agency - Chet Foong. Chet provides strategic leadership and planning for Ready Media Creative services and is on the forefront of all creative campaigns.

Rob also chats with Michael Rothner, Principal of property investment house, AsheMorgan, who has been instrumental in the expansion of the business both domestically and internationally. We look at ‘what will define the next generation of the office sector’ with insights from Natalie Slessor, Lendlease’s Head of Customer & Digital Investment Management as well as share some breakthrough news about 3D concrete printing and how the future of construction is changing. Speaking of games this month, we learn all about Sebastian Drapac’s ‘rules to playing the international investment game’, his being an infinite one that has held stead all the way from his beginnings ‘down under’ to the USA. Australian property developer Luke Berry of Third.i who is also enjoying great international success, talks to us about his journey across the globe and some defining elements that have contributed to his success. Finally, as always, we have included commercial investment listings, upcoming auctions and EOI’s as well as our ‘monthly market moves’ around the Country. Enjoy the read.

Nick Headshot - TPDR Intro Pag

Ready Capital is also now in full swing having enjoyed a successful first month in the market providing flexible

debt and equity solutions to our developer clients. The response has been hugely positive with numerous deals in motion. Head to their website www.readycapital. com.au or link through via our new corporate website www. readymedia.com.au where you can also view our full suite of end-to-end creative, marketing and tech offerings. In ‘The Interview’, Rob Langton speaks with John McGrath, Founder & Executive Director of ASX-listed property business, McGrath and best-selling author and panellist of the ‘Shark Tank’ television series. Lauded as a visionary, John has become a highly- respected and sought-after leader, with his specialist industry knowledge. Commencing with a single office in 1998, the McGrath business now encompasses some one-hundred-and-eleven offices and two-thousand team members, transacting over $19 billion worth of property in the past financial year

MAGAZINE DESIGN Nespecart

ON THE COVER John McGrath

NICK MATERIA CEO - Ready Media Group

October / November 2022 – 3

List on DevelopmentReady today! Speak with our expert team for more information

VIC Frank Materia Residential State Manager 0400 649 959

NSW | ACT Todd Stockley Majors & Key Account Manager 0428 399 357

VIC Scott Bremner Chief Customer Officer 0487 600 077

QLD Sally Miller Major Accounts 0459 398 151

VIC Damien Soltan State Sales Manager 0481 117 380

QLD Jake Ragkousis National Sales Director 0447 460 230

SA | WA | TAS Michael Arcobelli

VIC Michael Bevilacqua Head of Majors & Key Accounts 0437 426 043

State Manager 0488 882 726

NSW Ted Lloyd State Manger 0408 276 103

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CONTENTS

12 THE INTERVIEW Michael Rothner Principal AsheMorgan 8 THE CAPITAL EXCHANGE With Natalie Slessor 14 THE TALK Sebastian Drapac 6 THE INTERVIEW John McGrath Founder and Executive Director McGrath Estate Agents

18 FEATURED NEWS South Australia’s record year for pub sales continues with ALH’s Crown Inn

19 FEATURED NEWS ‘Never offered before’

Robina development site in growth precinct hits the market 22 FEATURED NEWS Over 100,000 sqm of land for sale in 17-property portfolio

26 MARKET MOVES

MARKET MOVES

COO of Drapac Capital Partners

30 AUCTION HUB

16 THE TALK Luke Berry Co-founder and

Auction Hub

International Director of Sales & Marketing Third.i

AGENCY 32 NSW MARKET OVERVIEW 60 VIC MARKET OVERVIEW 74 QLD MARKET OVERVIEW Ray White Ray White JLL 103 TAS LISTINGS 88 SA MARKET OVERVIEW Ray White 96 WA MARKET OVERVIEW

PRICE 34 NSW LISTINGS 76 QLD LISTINGS 90 SA LISTINGS 98 WA LISTINGS $2,275,000 62 VIC LISTINGS $5,950,000 $4,800,000 $760,000 $4,600,000 $855,000 $1,838,000

ADDRESS

ASSET TYP

67 Davenport Street, SOUTHPORT, QLD, 4215

Office / Reta

325 Mundoolun Connection Road, BOYLAND, QLD, 4275

Farming / La

119-121 Rusden Street, ARMIDALE, NSW, 2350

Burgess Rawson

Office

208 Barkly Street ST KILDA, VIC, 3182

Gross Waddell ICR

Retail

22 Rosenthal Avenue, LANE COVE, NSW, 2066

CI Australia

Office / Reta

4c McInnes Street, RIDLEYTON, SA, 5008

Industrial

35 Production Avenue, MOLENDINAR, QLD, 4214

Harcourts Coastal

Office / Indus

68 Caloundra Road, CALOUNDRA WEST, QLD, 4551

Savills & Colliers

$2,520,000

Retail

21-27 Somerset Place, MELBOURNE CBD, VIC, 3000

$7,000,000

Office

October / November 2022 – 5

532 City Road, SOUTH MELBOURNE, VIC, 3205

Allard Shelton

$1,400,000

Office / Reta

368 Merrylands Road, MERRYLANDS, NSW, 2160

Burgess Rawson

$7,100,000

Childcare

1120-1124 Albany Highway, BENTLEY, WA, 6102

Burgess Rawson

$10,060,000

Retail

The Interview

SCAN OR CLICK TO WATCH THE VIDEO INTERVIEW IN FULL

38 MINUTES

JOHN MCGRATH

With Rob Langton

FOUNDER AND EXECUTIVE DIRECTOR - MCGRATH ESTATE AGENTS

From a halted football career to real estate royalty: John McGrath talks beginnings and business

Managing Director of Ready Media Group, Rob Langton, recently sat down to talk with CEO and Executive Director of McGrath, John McGrath. As the leader of one of Australia’s foremost real estate agencies, he had plenty to discuss during this 38-minute interview as we delve into the evolution of McGrath Estate Agents. We’ve parsed through the extensive conversation to bring you some of the highlights. HIS SPORTS ASPIRATIONS WERE PUT ON HOLD BY A COLLAPSED LUNG “As I got into my thirteen, fourteen, fifteen years age groups, you could start to tell who was going to actually excel at sports, and I was one of those guys. You could also tell who was not going to excel in the classroom; I was one of those guys too.” McGrath grew up an avid sports fan and competitor, with an ambition to play rugby professionally for the Sydney Roosters and then Australia. His plans were cut short by medical concerns before he could get properly started. “As it turned out, I ended up having a collapsed lung as a late teen, so my sporting career literally finished overnight.” “I had an operation. At the end of the operation, I asked the doctor how long before I could train again. He told me that I could probably walk in a couple of weeks and jog a few weeks after that... He said that I couldn’t play football again. I couldn’t do anything that could risk impact on my lungs.” This forced McGrath to take stock of his options, and re- evaluate where he could make a career for himself. At the time, he was selling cars, but he didn’t want to make that his entire life.

“I couldn’t play football, and I got a bad HSC mark because I didn’t really try that hard in the classroom. I was stuck with, “What do I do next?” So, I went to a careers advisory centre... I ended up settling on real estate.” Given his successes in the world of real estate, McGrath looks back on that moment and views it as an integral turning point that changed his life for the better, even if he struggled to see the bigger picture at the time. As fortune would have it, he was forced to take another career path. IT TOOK MCGRATH SIX MONTHS TO SELL HIS FIRST PROPERTY After working as a property manager for a number of years, a young McGrath decided that shifting agencies was necessary to fulfill his goal of becoming the best sales agent he could possibly be. But whilst he picked up momentum quickly as a property manager, it took a little longer to get going in the sales world. “I thought because I had great momentum in property management, I’d just do the same and I’d immediately build great momentum in sales. But it took me six months to sell my first property.” The slow progression felt counterintuitive to someone who was so used to being able to strong-arm his way into rapid career advancement. “After the first three months I was starting to lose confidence. I was starting to think that maybe I am too young, which my previous boss had said.” But his dedication and perseverance eventually paid off; after months of struggling, McGrath was able to secure his first sale. The significant was not lost on the young agent, as is evident by the fact that McGrath remembers the exact address of the property in question.

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“28 Norfolk Street, Paddington, was my first sale, and I reckon that sale saved my career... because I got a sale, and then I got a second shortly after, and then a third one. I built momentum.” McGrath consistently refers to “momentum” as one of the chief tenets of his success, and this start in agency is a perfect example of exactly what that means. HE HIRED NON-EXPERIENCED AGENTS TO CREATE A POINT OF DIFFERENT FOR MCGRATH ESTATE AGENTS “At some point – four or five years into my real estate career – I figured I needed to be in an environment that was going to allow me to become the best real estate salesperson I could be.” Years of toiling away under the guidance of older and more experienced agents had led to McGrath developing a desire to go out and prove himself on his lonesome. “I figured I had to go and do it myself... so I went and started from the loungeroom, and then I went to a serviced office a few months later.” “Fortunately, I was naïve enough to not know how much money I should have had to start; how much experience [I lacked], and how many courses I hadn’t done. I just figured that if I was good at selling real estate that’s all I needed.”

“I was trying to do the little things. Still auctioning and selling real estate, but finding little points of difference that were customer advantageous.” HOW MCGRATH MANAGES BIG EGOS. As McGrath Estate Agents experienced growth and more offices were opening up, bigger and better agents were taking their talents to McGrath’s agency. With more established salespeople coming onboard, McGrath was faced with the challenge of taking agents with entrenched views on how to approach particular problems, and helping them adapt to the McGrath‘s framework. “Managing the highest performers is often the most challenging task – whether you’re in a sporting environment or a business environment, people who are elite at what they do... sometimes that comes with big egos, or a sense of entitlement.” “You will find from time-to-time people’s egos get in front of them.” The key to getting past a big ego? “Consistency. Over the years, transparency and consistency [have been instrumental]… We’ve built a framework that people have relied on that is transparent.” For him, communicating with his agents is an integral part of managing an agency. By staying in touch with every member of his organisation, McGrath doesn’t allow anyone to feel alienated or above the business. Every individual represents another spoke on the wheel, necessary to creating a positive working environment, and he makes sure to remind his agents of that fact. “I think you’ve got to be on the phone every day. I would spend two or three hours every day on the phone, often to my top franchisees, top-achieving agents, and just checking in.” AN EVOLVING LEADERSHIP TEAM IS CRUCIAL TO SUCCESS When pressed for advice, McGrath immediately highlights the need for a business to consistently evaluate its leadership team. “A business never outpaces its leader, or leaders. For a business to grow, you need to have a constantly growing, evolving leadership team.” “Sometimes that means some people out, some people in. Hopefully it means the people that are in stay there but they just keep growing.” You can’t just spend your way out of a leadership crisis, says McGrath. Systematic modifications need to be made if progress is to be sustained. “I don’t think you can just spend your way to more success with marketing. I think the leader and leadership team need to keep growing.” With that, comes the ability to take ownership over outcomes. A strong leader possesses accountability for both the successes and the failures of a team or project. “Extreme ownership says you’ve got to own the outcome no matter what, and then you learn and evolve from that.” An organisation’s leader will always want honesty from their employees, and that expectation demands that the leader returns the favour.

McGrath Estate Agents’ office

Sometimes, the inability to see all the qualities and knowledge you lack when starting a business venture is a good thing; you can throw yourself into the industry without being weighed down by expectations and pessimism. For the rest of his team, McGrath wanted to embrace that optimistic ethos entirely. He figured that established agents wouldn’t want to work under a young salesperson who had only just founded their own independent agency, so he reached out to individuals outside of the real estate sphere to fill out his team. “I started going around to people that I knew that I thought had talent that were not in real estate, and I told them to come and do a few Saturdays with me. So the first half a dozen employees were not in real estate.” The benefit of hiring outside of real estate was that McGrath could mould these agents into exactly what he wanted. “I was able to coach them and train them in my way, and they got momentum. And others that were experienced started looking across the garden fence and asking what we were doing.” This was only a single part of what made McGrath Partners (as it was then known) stand out from their competition during their early days. McGrath was always looking for small ways to create a distinct agency that bucks the local trends. “We used to do things very differently; everyone else was putting up photographs and I used to use pencil sketches, cause I thought that it was different. Everyone else was auctioning in a board room or a meeting room and I was auctioning at the property on-site. I introduced floor plans when no one else had used floor plans.”

John McGrath (left), with Danny Grant (centre) and Chris Mourd (right)

October / November 2022 – 7

The Capital Exchange

WHAT WILL DEFINE THE NEXT GENERATION OF THE OFFICE SECTOR?

EXCLUSIVE BY CALLUM HOFLER, READY MEDIA GROUP

NATALIE SLESSOR Head of Customer & Digital, Investment Management, Lendlease

Generally, what are the key trends in the office sector right now? There’s no doubt there’s a lack of ‘muscle memory’ when it comes to the office, following two years of out, in-again, out-again, hybrid…and everything in between. It’s taking time to establish patterns that make sense to individuals, teams and businesses in terms of supercharging culture, growth and outperformance. And the tight, and tightening, labour market alongside economic stress adds complexity it would take a 3D Chessmaster to unravel. We can see the macroeconomics, but we have also been partnering with data scientists like Propella, social scientists like Leesman Index and workshopping with the next generation of the workforce to get further under the skin of how we might respond. “It’s not just a flight to quality that will define the next generation of the office sector; it will be the flight to humanity.”

Natalie Slessor is the Head of Customer and Digital, Investment Management at Lendlease, one of Australia’s preeminent real estate groups, and has over two decades of experience advising, consulting, and exploring the future of living, leisure and work. From the Macquarie Group to Woods Bagot to Lendlease, Ms. Slessor has experience working all across the property and design industries: she’s a repository of valuable knowledge in these fields. The development of the office sector has been a constant fixture in the discussion surrounding the commercial property market as of late, and who better to comment on the current trends evident in the workplace than Ms. Slessor? In this Q&A, we get a first-hand account of what’s in-vogue for the office sector in 2022, courtesy of one of the industry’s brightest minds.

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Lendlease’s office - Courtesy of Office Snapshots

And through this complexity, using data and drawing on Lendlease’s international experience and perspective, we find that (and breathe now): simplicity is our greatest ally. People want to be where other people are, where cool things are happening, connected to transport and where nature is. There’s a lot of talk about flight to quality in the office sector right now, and at Lendlease we’re in fierce agreement that more sustainable, better constructed, digitally enabled and healthier places are our future. Side note: these factors are also Lendlease’s past and present… but that’s another story… needless to say, we’ve been on that track for many years, decades even, and we’re not going to stop leading the pack on this anytime soon. But it’s not just a flight to quality that will define the next generation of the office sector; it will be the flight to humanity. Hybrid work is more popular than ever, according to recent reports. How is the office sector adjusting to employees opting for a mix of WFH and working in-office? The phrase ‘earn the commute’ does spring to mind here, perhaps it’s overused but there is a point. Is it worth the time, cost and family-juggle to go to a dusty desk in an outdated place?

The office needs to be easy to get to, and great when you get there. Immediately transport proximate, amenity rich, fun yet safe places bring people and life back to our cities – and not just for the benefit of the office space. The city is underpinned by small retailers, start-ups, and scaleups that rely on proximity and footfall to survive. Not to mention the arts and culture sector. We owe it to them to get hybrid right in many ways. At Lendlease we’re supporting our urban retailers but also introducing culture into our precincts, activating the spaces in between the offices to see how we might play with the mix of what happens near the offices, to the benefit of the whole community. But we also have to get the basics right, family friendly amenity like childcare, gyms, showers with fluffy towels, great food options, even better coffee options. These are no brainers and again, part of what we have been working on for some time, we’re restless place-makers at our heart. Sustainability is becoming a pre-eminent concern for many tenants. How are developers going about creating more sustainable office spaces? We have to think that development is now planet-first. Sustainability is the core consideration in all of our office and

October / November 2022 – 9

The Capital Exchange

WHAT WILL DEFINE THE NEXT GENERATION OF THE OFFICE SECTOR? CONTINUED

Barangaroo - A Lendlease office development

workplace developments and is essential if Lendlease is going to reach its ambitious absolute zero carbon emissions targets by 2040. Our existing and potential tenants are all telling us that they want to be working in highly sustainable precincts that support their own sustainability and ESG goals. We can only achieve this through partnership with each other, a move we welcome and are embracing. Lendlease is mandated to achieve the highest possible ratings we can, and we’re proud to be held accountable to these standards, and you’ll see all our assets and new developments are on a pathway excellence in this area.

What are some of the most exciting office projects currently in Lendlease’s pipeline? I’d thought you’d never ask! All of this talk about the future is really nothing unless we’re acting on it and delivering great places in the cities where we work. Victoria Cross Tower in North Sydney is a prime example of the future of office and represents the latest global thinking in place creation and workplace experience. The 42-storey office tower is incredibly well-connected, located directly above the new Sydney Metro station, it offers brilliant workplace design, surrounded by a new mixed retail and dining precinct. It is also positioned to be one of Sydney’s most sustainable

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workplaces, as it will be net zero carbon, fully electric powered by 100 per cent renewables, and targeting a Platinum WELL and 6-Star Green Star rating. It’s a win-win for place and planet. But coming to life in 2023 will be Salesforce Tower at 180 George Street in the Sydney CBD, which is transforming a pocket of Circular Quay into one of Sydney’s latest new business, lifestyle and innovation precincts – incredibly there’s

Then from the tallest to the most boutique, at the other end of the scale there’s Blue & William in North Sydney. Think sweeping harbour views, a landscaped wellness garden and incredible open spaces, an organic café and an array of facilities to support healthier ways to commute. Nature and sanctuary, you’re welcome! Designed by global architecture and design studio Woods Bagot, it was

Salesforce Tower - Soon-to-be Sydney’s tallest commercial tower, developed by Lendlease

3401 S La Cienega - A Lendlease development recognised for its commitment to sustainablility

acquired last year by Keppel REIT and is being developed and managed by Lendlease. We’re thrilled with this new jewel in our crown. And of course in Melbourne we round out our spectacular Melbourne Quarter development with Melbourne Quarter Tower. Built to target the highest international standards in wellness and sustainability, a combination of highly-flexible, tech-enabled workspaces combine with progressive public amenity and an activated programmed precinct that spans an unique sky garden, a new public square and a public art and engagement program to rival the best.

a climate tech hub for scale ups in the building, not to mention the social businesses that will call this place home, it really is the new mixed use. It’s Sydney’s tallest commercial tower, with a revamped Jacksons on George, bars, restaurants and community spaces activating the laneways below – designed by one of the world’s leading architects Foster + Partners – the development has also been awarded a Platinum WELL rating and GBCA 6 Star Green Star, and is targeting a 5.5 Star NABERS energy rating. Salesforce Tower is already over 70 per cent leased – a testament to the strength and confidence in the return to office.

October / November 2022 – 11

The Interview

SCAN OR CLICK TO WATCH THE VIDEO INTERVIEW IN FULL

19 MINUTES

MICHAEL ROTHNER

With Rob Langton

PRINCIPAL - ASHEMORGAN

AsheMorgan’s Michael Rothner talks offshore capital, District Docklands, and investment fundamentals

Managing Director of Ready Media Group, Rob Langton, recently sat down with AsheMorgan’s Head of Investor Relations / Joint Ventures, Michael Rothner. As Principal for one of Australia’s most recognisable property investment houses, he had much to say during this 20-minute conversation. Here are some of the highlights from Rothner’s discussion with Mr. Langton. PRIOR TO THE GFC, ASHEMORGAN WAS THE LARGEST COMMERCIAL ORIGINATION BUSINESS IN AUSTRALIA AsheMorgan was established by Michael Moss in the early 1980s, and its initial offering involved providing specialist expertise in mortgage origination and management. Michael joined the team in 1990. At a time where the major institutions had an effective monopoly on the mortgage lending space, AsheMorgan was beginning to redefine the options for customers. “We were sort of at the forefront of non-bank lending.” With the non-institutional lending space such an influential sector in today’s property landscape, it’s worth appreciating that AsheMorgan was one of the early groups that paved the way for this burgeoning industry to take up a notable share of the lending market. “We were originating in excess of $3.5 billion a year, which even today is a big number. That was

our business back then.” In many ways, AsheMorgan’s early efforts were instrumental in enabling an embryonic idea to gain wider acceptance within the property and finance industries. “We were the conduit to people accessing funds, both through the major banks and through the non-banking sector.” ASHEMORGAN’S PIVOT TO PRIVATE PROPERTY INVESTMENT

Interior of No1 ANZAC Square - One of AsheMorgan’s preeminent office assets

Rothner highlights the years immediately subsequent to the GFC as the years that AsheMorgan shifted their business practice from origination services to a “private equity real estate model”, which is what they are best known for nowadays.

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“When we started, we were dealing with onshore, local high net-worth investors... assets that were generally up to that $75-$100 million mark.” “Across the board, we were investing in office, retail, residential, etc. We’ve sort of changed that now as the business has grown. We’ve started to tap into a lot of offshore capital.” In the competitive world of offshore capital, Michael stresses that opportunities arise based on “track record”. He maintains that AsheMorgan’s consistency has created a reputation that keeps overseas investors dialed into their projects, even as more and more groups jockey for the attention of this capital. “Once you start to build a track record and you’re bringing in capital and people can see that you’re performing, people want to get on the bandwagon.” THE DISTRICT, DOCKLANDS – REPOSITIONING 82,500 SQM IN NET LETTABLE AREA (NLA) “When we bought that, it was a bit of a white elephant... It’s taken us quite a while to reposition that asset.” The District in Melbourne’s Docklands is AsheMorgan’s long-haul redevelopment of a well-renown landholding, and is starting to generate some significant noise thanks to its rejuvenation of what was previously considered a misfiring. The group acquired the 10-hectare precinct from ING for $150 million in 2014, and since then, they have transformed what was a predominantly retail-centric commercial landholding into a diversified establishment that contains over 82,000 sqm in NLA. “It was sort of an unsuccessful Discount Factory Outlet; we’ve pivoted towards mixed-use. We’ve built an entertainment precinct. We’ve built a fresh food precinct. We’re pivoting the upstairs [areas] towards more commercial. It’s a real mixed-use asset.” For an area that had fallen into infamy, it has taken an incredibly

The District, Docklands - AsheMorgan’s 10-hectare redevelopment of a once-forgotten precinct

ambitious, concerted effort to transform The District into what it is today. WHERE THE PROPERTY SECTOR IS HEADED Many are bracing for turbulence, and it’s not surprising; the RBA’s hiking of the cash rate has led to an uncertain economic landscape. But Michael believes that some people’s expectations should be slightly more temperate. “My view is that things are not going to be as bad as what people expect.” That said, Rothner admits that a disruption is inevitable, but that it will be less severe than some experts are anticipating. “I mean, you’ve seen interest rates come up 2 per cent in the last six months – that hasn’t really filtered through yet. Surely that’s going to have an effect on cap rates... but I do think there will be opportunities. But I don’t think that there’s going to be any bloodbath coming in the next 6-to-12 months.”

AsheMorgan’s estimate of The District’s NLA to 2027

October / November 2022 – 13

The Talk

SEBASTIAN DRAPAC’S RULES TO PLAYING THE INTERNATIONAL INVESTMENT GAME

EXCLUSIVE BY SANDRA LOGIUDICE, READY MEDIA GROUP

SEBASTIAN DRAPAC COO of Drapac Capital Partners

“When you hit a corner, speed up. Because that is when you need to challenge and push yourself, whether that be spiritually, physically, intellectually, or professionally.”

This motto has clearly served Sebastian Drapac well. From wrapping promo posters on road poles at midnight to waiting on tables and paper rounds, the now COO of multi- billion-dollar investment company Drapac Capital Partners, understands hard work. Together with well-known industry expert and father Michael Drapac, Drapac have become renowned for their considered approach to successful investing, their ‘investment model’ and innate ability to interpret data and sniff out good deals unlike any other. Today they are one of the best operators in the business internationally with activity across Australia and the USA. Despite this success, Sebastian maintains a modest, down-to-earth demeanour. “There is nothing remarkable about my journey” he states. “I grew up like a lot of other kids in the 90’s with hard working parents from immigrant families, not liking school and just wanting to play soccer; however, I had an exceptional education and enough competitiveness and ambition in me to want to do more.”

He now has many academic credentials under his belt; a degree in Commerce (Economics) from Monash University, Masters in Real Estate from Melbourne University, and is currently completing an EMBA at NYU. However, it came from working in hospitality that he learnt his most crucial lessons. “It’s where I learnt to deal with sometimes being treated ‘less than’, and that humbles you. Doing those jobs on weekends, not getting paid very much, dealing with different, sometimes difficult people, it all gave me a good grounding which is important for character development. However, I have also had some very fortunate forks in the road and exceptional mentors along the way.” CBRE Sebastian talks very fondly of his early days at CBRE in 2007 with what he describes as a team of ‘rock star’ agents that he and Mark Wizel built together, including Josh Rutman, Max Cookes, Justin Dowers and Lewis Tong amongst many others.

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“I was so very fortunate to start with that team, I learnt something from each of them. But Mark Wizel really changed my mind-set when it came to thinking about performance and that’s part of what gave me the confidence and skills to come to the US and build our team here. It was a different mindset as the focus was not on commission; it was on building systems and processes and a competitive team, and I immediately gelled with that. He was extremely creative when it came to problem solving and thinking outside the box too. I loved my time at CBRE, it was wild, and I was running around with my hair on fire!” TRANSITION TO THE US. Following the Great Recession, the housing market crashed, and no one knew what the future held, but while the ‘rock star’ team were holding their ground at CBRE, Sebastian’s father Michael was scoping out greener pastures internationally in the background. The US housing market at the time had dropped 30-40%, and in some areas residential land dropped to agricultural prices. Banks were in trouble and there were distressed assets. Michael Drapac had already been looking at international markets for some time already however he finally set his sights on the USA as the place to be. “My Dad said to me ‘Don’t listen to anyone, the housing market will come back, the opportunity is there, these are the types of deals we’re going to buy, let’s just do the work.’” The father-son duo kept this thesis very simple and hopped on the next plane to Los Angeles with a 5-year plan to purchase 2000 residential lots. Instead, 10 years later they have now purchased 20,000 lots and hold a gross development pipeline in the vicinity of $7-$8 billion. “I’ve now learnt that it’s very dangerous to have too many goals anchoring you” Sebastian states. “Because when you are fixated on one thing, it is more difficult to identify opportunities elsewhere with a clear mind. Some people may see that as a weakness however I think that’s our superpower. We’re nimble, we just do the next thing, keep our options open and constantly reassess at every juncture.” Founded in Melbourne more than 30 years ago and now led by Sebastian and Michael Drapac, Drapac Capital Partners is a dynamic, value investment firm that has now grown into a multi-disciplinary company with operations both in Australia and the US. They are known for their unique investment model, attention to detail, and ability to identify undervalued markets, this together creating the perfectly balanced framework for prolific investment. They have a running 54% IRR (AUD) from the U.S. project, with several assets that hold record breaking results, one example being a development site in Midtown Atlanta which Drapac purchased for $4.7million and sold 2.5 years later, for $19million. It was the highest rate per square meter ever sold for a development site in Atlanta, a particularly impressive and proud moment for these Australian ‘out-of-towners’. “My Dad especially has an interesting skillset. His extrapolation of data is exceptional. He knows how to interpret and analyse data better than anyone I’ve seen. This is coupled with a unique disposition with numbers and intuitive ability to know if a deal is “good” or not, or if it’s mis-priced. When you mash these together it’s powerful, and you can’t teach it.” One thing he drilled into me, is a deep understanding of probability and risk management. We don’t think of ourselves as being in the property game, we are in the value investment game because you could apply the Drapac Investment Model to any asset class, and provided

that several conditions are met, it works. We just use real estate because we have an affinity with it. However most importantly, he taught me to remove myself from the emotion in high-pressure situations and make strategic, level-headed investment decisions.” THE DRAPAC INVESTMENT MODEL. From the outset, Drapac could be viewed like any other investment firm, however once you scratch beneath the surface, it is clear they are not. They hold an almost ‘old school’ approach to business, away from the office towers, spreadsheets and calculators and combine this with an incredibly sophisticated, institutional framework and investment model that sets them apart from the rest. Sebastian refers to it as a ‘rebellious DNA’, a counter-culture to the typical RE investment firm who traditionally invest according to the low-risk/low-return high-risk/high-return matrix. “We just behave and assess things differently” he states. “We buy assets for their underlying investment value rather than pay premiums for blue sky potential and we believe our risk profile is extremely low. For example, we may take on timing risk whereby a market may not gentrify as quickly as we anticipate but maintain low gearing and debt levels. ’Risk’ is typically mis-priced on real estate deals, so if you can quantify it better than others, which we feel we do, you are adding value at that buying point of the investment life-cycle. It’s possible to defy the risk-return matrix through quantification, mitigation and value-add strategies. If you get that right the return profile is asymmetrical – limited on the downside, and exponential on the upside. Whilst managing risk is the foundation upon which Drapac is built upon however as with most successful companies, a great culture and people who are aligned with their authenticity and ambitions are invaluable to them. Whilst managing risk is the foundation upon which Drapac is built upon, the promotion of a great culture and the commitment to forming a team that exudes authenticity and ambition is an invaluable part of the process. “We’re not for everybody - however, if you want to learn, grow, understand value investment and real estate, and enjoy outsized financial benefits over time through effort and dedication, then Drapac is a great place for you. But if you’re not culturally and ethically aligned, it won’t last very long. “We do good things and have great outcomes because we treat people right and are good business partners; we do not try to tick any boxes and be someone we’re not. There needs to be a cultural alignment with who we work with. It’s very important to how we operate.” Sebastian’s modus operandi is very clear; it’s defined but fluid, technical but intuitive, open but selective. I question how he maintains this ‘sharpness’ and motivation every day, a competitive edge that very much appears to be ingrained in his persona. “I come into work every day feeling slightly uncomfortable.” He states. “It’s a pre-condition for growth. Whether it’s training or work, it is important to feel slightly uncomfortable every day and push yourself to that line where you know you’ve exceeded your boundaries. That is something I took away from my time at CBRE and is now ingrained in me. It makes you stay in the zone. It is the same concept as speeding up around the corner - it would be much easier to not challenge oneself when things seem difficult or ‘the fridge is full’, but that’s when you need to speed up.”

October / November 2022 – 15

The Talk

‘WELCOME TO OPTIMISM & INNOVATIVE BRILLIANCE’: HOW THIRD.i BUILT THEIR EMPIRE ON AN INTERNATIONAL SCALE .

EXCLUSIVE BY SANDRA LOGIUDICE, READY MEDIA GROUP

LUKE BERRY Co-founder and

International Director of Sales & Marketing Third.i

As you walk into Luke Berry’s office, the word ‘Optimism’ is written on the wall in every language possible.

and financial systems are more willing to engage with the private sector and co-invest with businesses like ours to create housing. The roadblocks that we have in Australia such as pre-sales and foreign ownership are simply not present in the UK. Australian Developers are conditioned to navigate these challenges on their own, but in the UK, the Government will buy off the plan at launch and banks will allow more property to be sold to foreign investors”. As you can imagine this is a game changer for us and we are building our UK business based on the Australian way of doing things. With less restrictions we are amplifying our growth and ‘so far, so good’. It seems the ‘establishment’ are getting blown away by our approach and capability and hopefully this continues into the future, and we can continue to be successful over there”. “The design, the architecture, the way our buyers experience buying off the plan, everything we do at Third.i has that flair of innovative brilliance. ‘Creating legacies, we are proud of through innovative brilliance” has been our tagline since we started the business so it’s very important to us and I believe it is a one of our greatest keys to success.” Luke’s passion for property, building and attention to detail started at his family roots in Gunnedah, Country NSW. His father was a carpenter, and his grandfather and great grandfather operated a large-scale home builder and

“The environment we want to create for our staff is one that allows them to shine, challenge themselves in the right way and be optimistic about what they are creating with us at work. We believe there is never a bad idea and we often say ‘It’s no use having a good idea unless you’re willing to do something with it and make it a great one’, so every day it’s ‘Welcome to optimism - feel free to challenge yourself and be as innovative as you can.’” From country boy to Co-founder and International Director of Sales & Marketing, Luke Berry’s optimism and innovative brilliance has now certainly taken flight across the globe. Third.i have transacted more than $2billion of residential, commercial, and mixed-use developments across the UK and Australia most of which have been sold out before construction commenced. The group currently have more than $3billion of work in the pipeline and they also have offices/operations in Singapore and are soon looking to expand into Hong Kong. “Internationally people find us Australians quite unique. We work hard down here and although we have one of the best property systems in the world, we also have one of the hardest to navigate from a property development point of view. In the UK, they have a very similar market and are also experiencing similar housing shortage issues to Australia, however the key difference is that both the UK government

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THE PROPERTY DEVELOPMENT REVIEW

workspaces, and business flex on their leases. We’ve created this to get staff excited and change the way people think about how offices should work.” The Kurraba residences would also have to be one of Australia’s most ideally positioned and perfectly curated residential projects, with front row views of the Sydney Harbour. The project was a collaboration of star talents SJB, Matheison Architects and Danger Barin Smith who, together with Third.i and Phoenix Property Investors created a world-class lifestyle opportunity in Kurraba Point. Excitingly, the master residence, a 640sqm apartment is listed for sale at $50million that will soon set a likely set a record for this part of Sydney. Architects SJB articulated it perfectly, “...it’s that confident, well-dressed building that sits on the headland and engages with the landscape….” In addition to creating high-end masterpieces, cutting edge marketing campaigns, and working towards combatting climate change, Luke Berry is also committed to creating one of Australia’s largest networks of Specialist Disability Accommodation along the East Coast. “As a developer you have opportunity but with that comes responsibility. When you build what we build it’s there for generations so if you don’t think the way we think and leave the world a better place, then we’re not doing right by our children and their children. That legacy we want to create and leading by example is something we’re very passionate about.” Luke tells the story about a 19-year-old boy who broke his back in an accident and was living in a nursing home due to there being no alternative suitable accommodation available to him. One of Third.i’s SDA apartments gave him back his independence in an environment that someone of his age could enjoy living in. So profound was that experience, that it led Third.i into committing to creating 150 SDA properties by 2025 and so far, they are 50% of the way through… Driven, diverse, on-purpose, passionate and creative. Many things come to mind when you think of Third.i. They are a developer that are making a difference not only to their own pockets but to lives around them, taking ‘innovative brilliance’ to another level with each project they embark on; each time, seeking to discover and create something new that distinguishes them from the rest whilst creating a positive legacy. “I’m always looking for different angles, and to challenge ourselves to do better.” Luke states. “I’ve always thought on my feet and like to think that Ron, Bob and myself are good at thinking outside the square we live in, because one of our pet hates is hearing the words ‘we can’t do that as that’s just not how it’s done’. We love bringing in different types and levels of thinking and remaining competitive and challenging ourselves to be innovative. It’s just the way we are built.”

hardware in Gosford NSW, so property and construction are in Luke’s DNA. As such he always enjoyed building and wanted to venture into real estate eventually, but loved marketing, so when he was 24, he started his first business importing innovative marketing products with his now business partner Bob Huxley. “Bob was working in real estate at the time, and we always had the intention to carry through that same innovative brilliance into our property business.” And that they certainly have with Third.i now an industry recognised and award-winning developer both in Australia and throughout Asia. “As we launched Third.i Group, Ron was working as a financial planner and as soon as we secured our first project, he joined us to focus on finance and ops. He has since led the business and helped establish many of the joint ventures and funding structures that Third.i now employs with business partners both here in Australia and overseas.” In typical Third.i fashion, this company has grown, transformed, and diversified into many different sectors and they have done it with flair and carefully considered risk. Starting out in Australian residential, their journey has led them into the commercial sector, retirement homes, NDIS housing and more, across both Australia and the UK. To name a few, Graphite SquareLondon was crowned the fastest selling project in the United Kingdom, Mereweather Golf Club is being re-developed into a boutique collection of over 55’s residences, and the Dairy Farmers Towers in Newcastle will soon become a new iconic residential landmark across the city skyline. Luke spoke about each of these projects with equal enthusiasm however the following were some that stood out from the rest. Warada on Walker (link) is a particularly brilliant and innovative project in North Sydney where Third.i identified great possibility amongst adversity. Being conceived during the bushfires and designed during the pandemic, the Waratah flower was used in their marketing to symbolize the beauty of the building and the resilience of not only the workplace after the pandemic but also of society. A Waratah flower blooming shows how we too have been revived, being more aligned with the needs of humanity and the world we live in today. This commercial project is designed to be a part of that new world. Warada on Walker is “a resilient and resounding workplace for the future…re-inventing flexibility and sustainability with unrivalled workplace amenity” “It has been a challenge getting people back to the workplace however I think we’ve cracked the code on creating an office that is going to inspire people. We’ve created a brand, and a compelling story together with genuine incentives to return to the office. We’re creating a 1500sqm fitness playground which is free 2 days a week to the employees of the tenants. We’ve addressed health and wellness, ESG, food & beverage, collaborative

Warada on Walker - North Sydney

Graphite Square - Vauxhall Walk, London UK

October / November 2022 – 17