Welcome to Issue 46 of The Property Development Review, exclusively for agents, developers and investors.
NOVEMBER / DECEMBER 2023 - ISSUE NUMBER 48
EXCLUSIVELY FOR PROPERTY DEVELOPERS, INVESTORS & AGENTS ACROSS ASIA-PACIFIC
LISTINGS The latest commercial assets and development site opportunities across Australia.
INTERVIEWS We speak exclusively to Australia’s best business and property leaders.
ANALYSIS Unique perspectives from the deal-makers on the ground.
CONTENTS
4 PODCAST John Poynton AO Chair & Co-Founder Poynton Stavrianou 5 THE INTERVIEW Shesh Ghale Co-Founder & Chief Executive Officer of MIT Group
22 NSW MARKET OVERVIEW Harry Sullivan JLL 46 VIC MARKET OVERVIEW Peter Bremner Gorman Allard Shelton 88 QLD MARKET OVERVIEW Robert Dunne Savills
11 MARKET INSIGHTS Oliver Totani Knight Frank 12 MARKET INSIGHTS
Ted Fitzgerald Korda Mentha
The Rise of Non-Banks
14 MARKET MOVES The Latest Transaction Activity & Key Deals 13 MARKET INSIGHTS James Matley Colliers Brisbane’s 2023 Inner-City Apartment Market Review
6 MARKET INSIGHTS Vanessa Rader Ray White Commercial Invesment and Construction Activity
8 INVESTMENT Irina Tan Pitcher Partners Victorian Land Tax 10 PODCAST Kevin Moloney Chairman Tulla Group
124 SA MARKET OVERVIEW Ben Parkinson JLL 132 WA MARKET OVERVIEW Stephen Harrison Joint MD Ray White Commercial
MARKET MOVES
changes to put residential developers in more pain
20 UPCOMING COMMERCIAL AUCTIONS Auction Hub
Auction Hub
Auction Hub
Auction Hub
Upcoming
Auctions
Upcoming
Auctions
24 NSW LISTINGS 48 VIC LISTINGS 90 QLD LISTINGS 134 WA LISTINGS 126 SA LISTINGS
2 – November / December 2023
THE PROPERTY DEVELOPMENT REVIEW
FROM THE CEO
Greetings to the last release of The Property Development Review for this year – the summer issue! What a dynamic year its been for the property market! The fluctuations across a number of sectors made it tough for experts to anticipate trends. At the Ready Media Group, we experienced significant overall growth and pioneered the market by further enhancing our proprietary proptech tools including Instadocs and District Data. Within this edition, we present current industry-related articles, podcasts, interviews, and summaries for you to consume now and during the holiday season. Vanessa Rader, Ray White’s Head of Research, returns with a deep dive into construction and reviews the statistics behind the crane index nationwide. Discover which cities exhibit the strongest crane growth, what development sector this signifies the most growth for, and the implications for property development in Australia. Vanessa also explores the surge in commercial investment in alternative asset classes over the past two years, and probes crucial questions about what’s on the horizon. Irana Tan, Partner at Pitcher Partners, guides us through crucial changes to the Victorian Land Tax, vital for residential property developers and holiday homeowners in the state. Join the podcast Oliver Totani, Partner and Head of Capital Markets at Knight Frank, as he shares insights into the South Australian property market, spotlighting Adelaide’s resilience in the face of wider economic influences. James Matley, of Colliers’ Queensland conducts an in-depth review of Brisbane’s inner-city apartment market, offering key market insights and a peek into potential 2024 trends. Ted Fitzgerald, Partner at KordaMentha, explores the rise of non-bank lenders and
how increased funding costs are impacting the development market. He emphasizes the necessity for lenders to meet statutory obligations to manage risk in this volatile lending environment. In our exclusive interview series, Rob Langton engages in a discussion with John Poynton AO , a highly respected corporate advisor integral to Western Australia’s business community for over four decades. Additionally, Rob delves into an exclusive interview with Shesh Ghale , Co-Founder & CEO of MIT Group, a renowned property developer, and global philanthropist, exploring his background, passion for education, and key ingredients for success. Furthermore Rob speaks extensively with Kevin Maloney, Founder & Chairman of family office investment firm Tulla Group, covering his journey, early successes, the rise of MAC Services, career milestones, and his family office’s investment focus.
EDITOR IN CHIEF Frank Materia frank@ readymedia.com.au
IN-HOUSE WRITER Oliver Gregurek
ADVERTISING OPPORTUNITIES frank@ readymedia.com.au PROPERTY LISTING ENQUIRIES info@ readymedia.com.au EDITORIAL ENQUIRIES editor@ readymedia.com.au CONTACT Ready Media Group Head Office Level 3 161 Buckhurst St South Melbourne VIC 3205 03 9631 5476 info@ readymedia.com.au
As always, we bring you the latest commercial and development opportunities nationwide, along with significant transactions from the past month plus more. Enjoy the read and have a thoroughly deserved break! Nick Headshot - TPDR Intro Page
MAGAZINE DESIGN Nespecart
ON THE COVER Lloyd Williams -unsplash
NICK MATERIA CEO - Ready Media Group
November / December 2023 – 3
Podcast
SCAN OR CLICK TO LISTEN TO THE INTERVIEW IN FULL 45 MINUTES
JOHN POYNTON AO
With Rob Langton
CHAIR & CO-FOUNDER - POYNTON STAVRIANOU
between universities, research institutions, and private enterprises. Tourism has also become a vital contributor to the state’s economy. Western Australia’s natural beauty, including pristine beaches, diverse wildlife, and unique landscapes like the Kimberley region, have attracted tourists from around the world. The state’s focus on sustainable tourism practices has further enhanced its appeal to eco-conscious travellers. Agriculture has experienced advancements, with modern farming techniques and exports playing a crucial role in the state’s economy. Western Australia’s agricultural products, including grains, livestock, and horticultural produce, are in demand both domestically and internationally. The education sector has seen significant growth, with universities in Western Australia becoming globally recognized institutions. This growth has attracted international students, contributing to cultural diversity and economic prosperity. The state’s business landscape has also been shaped by a commitment to environmental sustainability and renewable energy. Initiatives promoting clean energy technologies, such as wind and solar power, have gained traction, aligning with global efforts to combat climate change. However, challenges persist. Economic diversification remains a priority, as the state seeks to reduce its dependence on commodities and create stable, sustainable employment opportunities across various sectors. Building resilient supply chains, promoting innovation, and investing in skills development are crucial strategies in navigating the evolving business landscape. In conclusion, Western Australia’s business landscape has transformed significantly over the past few decades, embracing diversification, innovation, and sustainability. While challenges exist, the state’s resilience and adaptability, position it well for continued growth and prosperity in the future.
John Poynton AO is a renown West Australian based business identity. He serves as the Co-Founder and Chair of Poynton Stavrianou, bringing over four decades of expertise in advisory and capital markets, spanning equity, debt, infrastructure, and property. Alongside his role as an investment banker, John also actively contributes as a non-executive director for various ASX-listed companies, government entities, educational institutions, and non-profit organizations. John recently sat down with Ready Media Group’s Rob Langton for an in-depth interview - he discusses his business journey plus shares valuable insights on pivotal market sectors in West Australia. Here is a summary of John’s insightful interview. Certainly, over the past few decades, the Western Australian business landscape has undergone significant transformations, reflecting both global economic trends and local developments. The state’s economy, once heavily reliant on mining and resources, has diversified considerably, embracing sectors such as technology, tourism, agriculture, and education. In the early days, Western Australia was primarily known for its abundant natural resources, particularly in mining and energy sectors. The mining boom of the late 20th and early 21st centuries fuelled rapid economic growth, leading to increased investments, infrastructure development, and job opportunities. However, this period of prosperity was also marked by volatility due to fluctuations in commodity prices, impacting the state’s economic stability. Amidst these changes, the technology sector emerged as a significant player in the Western Australian economy. The rise of start-ups, innovation hubs, and technology- driven initiatives has fostered a culture of entrepreneurship in the region. This shift has been supported by investments in research and development, encouraging collaboration
4 – November / December 2023
The Interview
THE PROPERTY DEVELOPMENT REVIEW
SCAN OR CLICK TO WATCH THE INTERVIEW IN FULL 50 MINUTES
SHESH GHALE
With Rob Langton
CO-FOUNDER & CHIEF EXECUTIVE OFFICER - MIT GROUP
Capitalising on their natural entrepreneurial institution, the pair began investing in commercial property in the early 2000’s, successfully acquiring and divesting of multiple assets across Melbourne’s CBD including Tomasetti House, The Argus Building, Sir Charles Hotham Building, 386 - 412 William Street, 388 Lonsdale Street and 154 - 158 Sussex Street in Sydney’s CBD amongst others. In addition to his extensive domestic property interests, Shesh also has a number of investments globally including Sheraton Kathmandu Nepal held through his family office, The Ghale Group - he has also donated his time and considerable resources to a number of philanthropic and community-based organisations.
Our exclusive interview with billionaire Shesh Ghale explores his background, his passion for education, his deal-making in the commercial property sector and the key ingredients that have enabled him to become one of Australia’s most successful individuals and global philanthropist. In an extraordinary tale of success defined by resilience, adaptation and hard-work, Shesh has risen from a childhood spent in the rugged mountains of Nepal in the early 1960’s through to an early education in the Former USSR of Ukraine, ultimately culminating in the decision to re-locate to Australia in 1990 and embarking on a career-defining pursuit into the educational and property investment industries. Following his high school education in Nepal, Shesh moved to Ukraine and studies a Bachelor / Master of Civil Engineering at Kharkiv National University on a Government Scholarship, graduating in 1986 before returning to Nepal to work as a project engineer in the Government’s transport department. Seeking greater access to career opportunities, Shesh then moved to Australia in 1990 and embarked on further study, enrolling in a Master of Business Administration degree at Victoria University graduating in 1994 - his wife, Jamuna Gurung followed and re-located to Australia in 1991. Having experienced first-hand the quality of education offered through the university system in Western countries, Shesh identified an opportunity to provide world-class study pathways largely targeted toward international students in Melbourne, therein establishing the Melbourne Institute of
Technology (MIT) in 1996 alongside Jamuna. Over the course of the past twenty-five years,
Shesh & Jamuna have grown MIT into one of Australia’s most successful private tertiary education institutions, with purpose-built campuses in both Melbourne & Sydney and a cohort of over four-thousand students per annum.
November / December 2023 – 5
Market Insights
THE RISE AND RISE OF THE ALTERNATIVES, BUT WHAT’S NEXT? Commercial investment levels are significantly down this year compared to our busy last few years.
however, the greatest fall has been felt in the last year to 17.8 per cent in 2023. Sentiment shift across the office asset class has been strong given the rapid rise in vacancies due to the changing nature of workplaces in a post-COVID environment. Working from home has had a significant impact on the way in which tenants interact with office assets, many reducing their footprint or seeking out alternatives putting pressure on occupancy, rents as well as values. Similarly, the development site space has seen some consolidation due to the rapid escalation in construction costs and labour shortages. While only representing a small portion of the market, we continue to see these assets becoming more difficult to “stack up” despite pressures to develop various asset classes given the recent gains in population across the country. This year, development site sales represented 4.2 per cent. after recording 7.9 per cent in 2020. Moving quickly in the opposite direction has been the broadly termed “alternatives” space, which includes assets such as childcare, medical, and service stations. These assets have been growing in popularity over the past ten years, and their attractiveness has not wavered during this time of elevated finance cost. This year, these assets represented 10.3 per cent of all of the sub $50 million commercial investment, compared to 3.5 per cent in 2020. Investment yields for these assets continue to trade at competitive rates given their expected growing income stream during a time where the built form is king given replacement costs. Within the alternatives segment, the largest growth area has been in medical assets. Our increased needs across all age groups, coupled with robust population improvements, is growing requirements for these assets. Similarly, childcare continues to increase, buoyed by government subsidies, notably in key growth nodes across the country. Despite the threat of electric vehicles, service stations remain in demand, particularly those with future upside potential. Challenges across the housing market have also seen a resurgence in enquiry around “block of unit” investments, capitalising on rising rents, low vacancies, and continued capital appreciation, which has now extended into boarding houses and the build-to-rent space. The variety of investments are vast - car parking and storage assets offer inexpensive opportunities to diversify many investors portfolios. Hotel and leisure assets have also grown their share of volume, with caravan parks a land banking opportunity by opportunistic investors. The chase to secure these assets has been faster and more active than traditional commercial investment options, which raises the question of: what’s next? Perhaps the humble car wash might be the next one, with limited investment needed into the built form, and as vehicle sales continue to grow inline with our population gains; these could offer both a stable income with strong future development upside.
Vanessa Rader Head of Research Ray White Corporate
The rise and rise of the alternatives, but what’s next?
Vanessa Rader Head of Research Commercial investment levels are significantly down this year compared to our busy last few years. Increased interest rates and geopolitical risks have now added to uncertainty across the broader market, which will likely result in subdued activity into the new year. While financing has been a major issue for most buyers, the private investor market has been the most active, notably in the sub $50 million price range. Industrial has been the golden child of the last few years, accounting for the lion’s share of total commercial volumes, averaging 39.6 per cent over the past four years. During this time we have seen some asset types’ interest dwindle, while others have surged in popularity. Ray White Corporate Increased interest rates and geopolitical risks have now added to uncertainty across the broader market, which will likely result in subdued activity into the new year. While financing has been a major issue for most buyers, the private investor market has been the most active, notably in the sub $50 million price range. Industrial has been the golden child of the last few years, accounting for the lion’s share of total commercial volumes, averaging 39.6 per cent over the past four years. During this time we have seen some asset types’ interest dwindle, while others have surged in popularity. Commercial investment levels are significantly down this year compared to our busy last few years. Increased interest rates and geopolitical risks have now added to uncertainty across the broader market, which will likely result in subdued activity into the new year. While financing has been a major issue for most buyers, the private investor market has been the most active, notably in the sub $50 million price range. Industrial has been the golden child of the last few years, accounting for the lion’s share of total commercial volumes, averaging 39.6 per cent over the past four years. During this time we have seen some asset types’ interest dwindle, while others have surged in popularity. Vanessa Rader Head of Research Ray White Corporate The rise and rise of the alternatives, but what’s next?
Despite the changing volumes peaking in 2021, the share of investment activity by asset class has remained relatively stable. For the first nine months of this year we have recorded over $19 billion in transactions in the sub $50 million price range, well behind last year’s $45.7 billion and peak results of $53.3 billion. Interest in the office sector has shown consistent decline year on year. During 2020 it accounted for 21.3 per cent of all sales,
6 – November / December 2023
THE PROPERTY DEVELOPMENT REVIEW
COMMERCIAL CONSTRUCTION ACTIVITY UP, CRANE GROWTH STRONG IN SYDNEY The construction sector continues to be tough despite some moderation in costs seen more recently. Commercial construction activity up, crane growth strong in Sydney The construction sector continues to be tough despite some moderation in costs seen more recently. While the cost of raw materials continues to grow, the labour costs remain a stumbling block for many developers looking to get projects off the ground. For non-residential projects we have seen an uplift in the RLB crane index over the last six months, just shy of Q3 2022 levels. Sydney was the busiest region with civil projects most active in response to major infrastructure projects underway across the country. Vanessa Rader Head of Research Ray White Corporate
Following this trend, high crane counts in the health and education sectors continue in response to high population growth and increased need for these facilities. While commercial crane numbers are down, there are still 22 cranes across the Australian market, putting further pressure on an already difficult office sector which has been hampered by growing vacancies due to subdued demand levels post COVID-19. Looking at cities, Sydney has had the greatest number of new cranes appear. Overall across both residential and non-residential sectors, this has eclipsed 400 for the first time. While residential accounts for 261; mixed use, commercial and civil/civic make up the bulk of the remainder. Brisbane is another market growing its crane count thanks to infrastructure projects, while Canberra, Central Coast, Gold Coast and Newcastle have had small gains Melbourne’s Westgate Tunnel together with Brisbane's runway to the 2032 Olympics all adding to this construction activity. in this space as well as mixed-use projects. Melbourne has seen some commercial and mixed use projects come to an end reducing its crane count this period. Following this trend, high crane counts in the health and education sectors continue in response to high population growth and increased need for these facilities. While commercial crane numbers are down, there are still 22 cranes across the Australian market, putting further pressure on an already difficult office sector which has been hampered by growing vacancies due to subdued demand levels post COVID-19.
While the cost of raw materials continues to grow, the labour costs remain a stumbling block for many developers looking to get projects off the ground. For non-residential projects we have seen an uplift in the RLB crane index over the last six months, just shy of Q3 2022 levels. Sydney was the busiest region with civil projects most active in response to major infrastructure projects underway across the country. Currently there are 882 cranes on the Australian skyline, 554 cater for much needed residential projects throughout the country, growing the index steadily to 175. Since the inception of this index in 2015 we have seen a greater improvement in crane activity across the non-residential space, now accounting for 328 cranes or an index of 285. The uptick seen over the last six months is representative of a growth in only a few asset types. Mixed-use developments have added to the growth in crane count with an increase of seven cranes, to a total of 77, which is representative of the housing supply issue and the appeal of mixed-use options which include commercial uses. Historically, this may have been for office, or serviced apartments on multi- floors, or ground floor retail. However, the growing requirement of services such as childcare and medical have seen many developers pivot to include these uses in their mixed-use development as an alternative to previously attractive options. Civil projects have seen an 11 crane increase over the last six months, with high investment into public infrastructure being a major result of this. East coast markets seeing the bulk of these cranes; major projects such as Sydney’s WestConnex, Western Sydney Airport and Melbourne’s Westgate Tunnel together with Brisbane’s runway to the 2032 Olympics all adding to this construction activity.
Currently there are 882 cranes on the Australian skyline, 554 cater for much needed residential projects throughout the country, growing the index steadily to 175. Since the inception of this index in 2015 we have seen a greater improvement in crane activity across the non-residential space, now accounting for 328 cranes or an index of 285. The uptick seen over the last six months is representative of a growth in only a few asset types. Mixed-use developments have added to the growth in crane count with an increase of seven cranes, to a total of 77, which is representative of the housing supply issue and the appeal of mixed-use options which include commercial uses. Historically, this may have been for office, or serviced apartments on multi-floors, or ground floor retail. However, the growing requirement of services such as childcare and medical have seen many developers pivot to include these uses in their mixed-use development as an alternative to previously attractive options. Civil projects have seen an 11 crane increase over the last six months, with high investment into public infrastructure being a major result of this. East coast markets seeing the bulk of these cranes; major projects such as Sydney’s WestConnex, Western Sydney Airport and
Looking at cities, Sydney has had the greatest number of new cranes appear. Overall across both residential and non-residential sectors, this has eclipsed 400 for the first time. While residential accounts for 261; mixed use, commercial and civil/civic make up the bulk of the remainder. Brisbane is another market growing its crane count thanks to infrastructure projects, while Canberra, Central Coast, Gold Coast and Newcastle have had small gains in this space as well as mixed-use projects. Melbourne has seen some commercial and mixed use projects come to an end reducing its crane count this period. November / December 2023 – 7
Investment
VICTORIAN LAND TAX CHANGES TO PUT RESIDENTIAL DEVELOPERS IN MORE PAIN. The Victorian Treasurer unexpectedly announced further significant property tax updates in early October, after already having introduced various significant property tax changes less than five months prior as part of the 2023-24 Victorian Budget.
Irina Tan Partner Pitcher Partners Melbourne
Photo by Dylan Lu - Unsplash
VRLT background and issues The VRLT has been a problematic property tax for years; its saving grace being that it has only applied to residential properties in the inner and middle suburbs of Melbourne. The existing problems will become more widespread with the proposed expansions to the VRLT rules. Introduced in Victoria back in 2017 as the first of its kind at the state level for residential properties (no surprises there, as the state of Victoria is often a trailblazer when it comes to property taxes), the VRLT was designed to address the number of properties left empty across inner and middle Melbourne suburbs. The government’s stated aim is to encourage “owners who unreasonably leave these properties vacant” to make them available for either purchase or rent hence reducing “the pressure on house prices and rents and add to the government’s overall housing affordability strategy”. Accordingly, the VRLT has to date targeted only areas of Melbourne where issues of housing affordability are considered most pressing. The crude supply/demand
The changes slated to impact property owners as early as 1 January 2024 include major expansions to the Vacant Residential Land Tax (VRLT) rules. The changes are in draft legislation subject to approval by the Victorian Parliament at the time of writing. What are the changes? The major changes proposed are: 1. The VRLT is to be payable (at the rate of 1% of the Capital Improved Value (CIV)) on any residential properties anywhere in Victoria that are vacant for more than six months in the previous calendar year. Previously only relevant to properties in inner and middle Melbourne, this is proposed to apply from 1 January 2025, affecting Victorian residential properties that were vacant for the requisite period in 2024. 2. The VRLT is to also apply to unimproved or undeveloped properties that have been unimproved for five years or more in certain areas of metropolitan Melbourne, that are currently not subject to the VRLT. This is proposed to apply from 1 January 2026, affecting properties that have not been developed as required by the end of 2025.
8 – November / December 2023
THE PROPERTY DEVELOPMENT REVIEW
significant tax complications and therefore is not always feasible. New problems Apart from the existing problems, the proposed changes to the VRLT rules carry new problems. Firstly, the expanded rules are proposed to take affect from the 2025 land tax year which, according to drafters of the new rules, provides “adequate time” for landowners to deal with the changes. However, the application of the rules in the 2025 land tax year looks back to the use of the property starting from 1 January 2024 – about two months away. As properties count as vacant if not occupied for more than six months in a year, properties at risk of the VRLT effectively need to be occupied starting no later than July 2024. So in reality, many landowners have approximately six to seven months to get their head around yet another set of new tax rules (assuming Parliament passes the rules by the end of 2023), ensure that any properties undergoing construction or renovation are completed within the relevant timeframe, ensure that properties are fit for occupation and ensure that the properties will actually be occupied for the relevant periods. Adequate time? I think many would disagree. Secondly, when it comes to the application of the rules to unimproved or undeveloped properties, the proposed rules, as currently drafted, provide the Commissioner of State Revenue with a range of discretionary powers to decide if properties should be subject to the VRLT. This could give rise to a lot of uncertainty and lead to potentially harsh outcomes for landowners. While taxpayers may sometimes benefit from the exercise of the Commissioner’s discretion in their favour, leaving broad discretionary powers with the Commissioner is unwise. With various circumstances (such as planning delays) often outside a landowner’s control, this could leave room for subjectivity and disputes regarding when and how the discretionary powers should be exercised. Be aware and act now Unfortunately, with these VRLT changes Victoria is expected to maintain its reputation for the highest property taxes, and time will tell if the changes ultimately hinder, instead of help, the housing issues. Developers and holiday homeowners need to be aware of the proposed changes, consider the potential impact on their specific circumstances and explore mitigating strategies where required. The rules are complex and the quantum of VRLT could be significant (as it is a percentage of the CIV) - so property owners should tread carefully.
rationale for the tax is questionable, as in its five year tenure we have not seen any statistical evidence of the tax achieving its purported aims. In introducing the proposed expansions to the VRLT rules, it was recognised that the issue of housing affordability remains acute across the whole of Victoria with the expectation that expanding the VRLT to the entire state will ease pressure on rents and prices. Current evidence makes this unlikely. When the VRLT was first introduced in 2017, the government recognised that “there are legitimate reasons why some properties have been left unoccupied and sought valuable input from industry stakeholders on the nature and extent of the exemption that will be required” and designed exemptions for holiday homes, city properties used regularly for work purposes, and residences undergoing renovations or rebuilds. However, there was a lack of proper industry consultation, leaving many persisting problems that are expected to compound with the proposed VRLT expansions. Existing problems for residential developers A key problem relates to residential projects that suffer delays in construction, or that have completed but the developers suffer issues with selling all residential stock. In those scenarios, a developer could face prolonged holding costs (such as ordinary land tax) and the VRLT at 1% of the CIV of the relevant properties. It is mind-boggling that developers, who are instrumental contributors to the supply of housing (and help advance the government’s housing policy), can get stuck with a bill for the VRLT despite all efforts to complete developments and sell properties in a timely manner. This appears to be an unintended consequence when you look at the background policy statements referred to above, and is no doubt unfair for the developers as well as the eventual purchasers of the properties given the VRLT would generally factor into the prices for the properties. While the above scenarios can affect several developers across multiple land tax years, there is next to no relief for such issues in the relevant VRLT legislation. This leaves many developers with limited potential solutions to deal with the issue. Existing problems for holiday homes Another key problem is one that involves holiday homes. Many holiday homeowners hold their respective holiday homes in discretionary trusts. However, the holiday house exemption only applies where, among other things, the owner of the holiday home also has a principal place of residence in Australia. This means that, essentially, the owner of the holiday house needs to be an individual, and holiday homes owned by trusts, such as discretionary/ family trusts and companies, are not eligible for the exemption. While there may be solutions involving the transfer of the ownership of the holiday home to an individual, often a transfer of ownership involves
November / December 2023 – 9
The Interview
SCAN OR CLICK TO WATCH THE INTERVIEW IN FULL 32 MINUTES
KEVIN MALONEY
With Rob Langton
CHAIRMAN - TULLA GROUP
By 1996, Kevin foresaw a unique opportunity to provide high-quality accommodation services to mining sites across Australia, launching MAC Services Group, a business which specialised in prefabricated buildings and constructed villages for mining communities via its seed asset in Queensland’s Moranbah. Over the course of the decade, MAC Services Group grew to encompass over 3,300 rooms across five villages, with revenues exceeding $69m per annum, ultimately culminating in the decision to float the business on the stock exchange in April of 2007. Under Kevin and his son Mark’s leadership, MAC Services continued to expand throughout Australia post public listing, with new villages opened in Western Australia whilst rooms under management exceeded 5,000 for the first time. In December of 2010, MAC Services (The MAC) was acquired by Oil States International Inc in a $689m deal, with investors receiving four times their money back in just three years whilst sowing the seeds for Tulla Group’s next chapter as a family office. Tulla Group is today one of Australia’s most successful and diversified family offices, with investments across mining and resources, technology, racehorse breeding, property & venture capital. Our discussion with Kevin charts his background, his early business successes and challenges, the extraordinary rise of MAC Services, his key career achievements, and the investment focus of his family office.
Joining our series for an exclusive profile is Kevin Maloney, Founder & Chairman of family office investment firm, Tulla Group. Born in Sydney in the late 1940’s to parents Joseph, a retired army major who upon discharge, went into the hotel business and Florence Maloney, Kevin was one of eight siblings whose early exposure to business was formed through his parent’s acquisition and management of the Zetland Hotel as well as their interests in horse-racing, a passion which continues to be prevalent throughout his life today. From humble beginnings in Sydney’s western suburbs, Kevin left school at age fifteen and began working as a clerk at ANZ, progressing through the firm to become the youngest person in its history to be appointed to a management role. During this time, Kevin’s thirst for hard work and his ambitious nature began to take shape, working full time at ANZ whilst also juggling roles three other part-time roles including as a poke machine attendant at the South Sydney Junior Leagues Club, a bookies clerk, and a taxi driver. Following a two-decade career with ANZ, Kevin left the firm and became a Founding Executive Director and the inaugural Chief Executive of Elders Resources Finance in 1986, a business which provided capital to finance resource projects across the World to the tune of more than $4bn in the gold, oil, gas, forestry, and silver industries. In the early 1990’s, Kevin established Tulla Group, a private investment vehicle to direct a number of ventures including diverse forays into jewellery, retail apparel, copper mining and building materials.
10 – November / December 2023
Podcast
THE PROPERTY DEVELOPMENT REVIEW
SCAN OR CLICK TO LISTEN TO THE INTERVIEW IN FULL 20 MINUTES
OLIVER TOTANI
With Rob Langton
PARTNER, HEAD OF CAPITAL MARKETS – KNIGHT FRANK ADELAIDE
We’re no longer reliant on a single industry. Diversification in sectors like defence and biomedicine indicates a robust and promising future. The education sector is thriving, promising a surge in student accommodation and city revitalisation plus there’s growing interest in the Build-to-Rent sector. As for market dynamics, well-positioned properties with solid fundamentals are selling within a reasonable timeframe, roughly four to five weeks. However, effective marketing strategies play a crucial role in achieving swift deals. Pricing, naturally, varies across sectors. While some areas, like commercial offices, face challenges, high-quality assets retain their value. Conversations with clients largely revolve around aligning expectations and market realities. Educating clients on strategic pricing and value enhancement is crucial. We encourage unconventional approaches if they promise better outcomes for our clients. Currently, our listings range from CBD development sites to office spaces in prime locations like Bowden Village. We’re excited about the prospects, especially for a fully leased office building with an NGO tenant, set to test the market’s appetite for premium-grade assets. Looking ahead, there might be a shift in buyer sentiment with a possible slowdown in interest rate hikes. This could reinvigorate market activity over the next six to twelve months. Overall, South Australia, particularly Adelaide, seems well-positioned for a period of sustained growth and opportunity.
Our guest on this episode of the Ready Media Podcast is Oliver Totani - Partner and Head of Capital Markets, South Australia with Knight Frank. Oliver is responsible for the growth and leadership of an expert transactional team covering key segments, including office, retail, development site sales, industrial and logistics. Recently, Oliver caught up with RMG’s Rob Langton to share his insights on South Australia’s commercial property market. Oliver’s overall observation is that while there’s considerable talk about current macroeconomic factors impacting the property market, Adelaide seems resilient. People are actively reviewing investment opportunities across different asset classes, indicating a positive outlook. Adelaide benefits from a stable government, contributing to its favourable position. Private investor interest has surged, particularly in industrial properties and neighbourhood centres. Even specialised sectors like childcare are holding steady in terms of demand and pricing. For developers eyeing Adelaide, there’s substantial potential in residential land. The city’s attractiveness, especially with expats returning and a growing population, presents significant opportunities. Additionally, there’s potential in repositioning lower-grade office spaces for higher returns, but it requires astute investment strategies. For those outside South Australia looking to invest here, understanding Adelaide’s evolving economy is crucial.
November / December 2023 – 11
Article
THE RISE OF THE NON-BANK LENDERS AND NAVIGATING INEVITABLE BREACHES With persistently high inflation forcing the RBA to increase the cas h rate by 4.25% over the past 18 months, the increase in cost of funds is putting significant pressure through the development market.
marketed and sold it for $7 million via a four-week expression of interest campaign. However, the amount owed exceeded the net proceeds of sale from the property. As a result, Manda demanded PEC repay the balance and commenced proceedings accordingly. On the surface, the matter appeared straightforward. Delving into the detail, however, it became particularly tricky. PEC admitted default under the loan and accepted the outstanding debt under the loan agreement. However, PEC then brought a counterclaim against Manda, stating its sale of the property in question breached Section 420A of the Corporations Act. PEC alleged that if Manda had sold the property in accordance with its duties under Section 420A, it would have achieved a price of $7.8 million which would have repaid the entire outstanding liability owing under the loan agreement. Fortunately for Manda, the case went in its favour. PEC’s counterclaim was dismissed for lack of merit and not substantiating any breach of Manda’s duty under Section 420A of the Corporations Act. Foremost among the key learnings from this case is that lenders need access to the right expertise to understand exactly what constitutes taking all reasonable care under Section 420A and how to navigate the selling process accordingly. Bank lenders have many years of experience in managing and enforcing on their security, whilst non-bank lenders, many of whom are new entrants, do not have the same depth of experience. If non-bank lenders do not access the appropriate expertise, they remain vulnerable to litigation, especially as we approach a market of greater uncertainty, risk of downturn and business failure. With increased scrutiny being placed on lenders and their appointed controllers in discharging their duties, it is critical that all lenders engage expert advice when there is a need to enforce on their security. Those lenders who consider the sales process a straightforward practice that can be performed without expert involvement run a high risk of being blindsided by costly legal action. Although Section 420A requires that a lender and its appointed controller must take reasonable care to sell a property for not less than market value or the best obtainable price given the circumstance, the differences from one power of sale transaction to another create a minefield to navigate. Sources: David Dickens, Cameron Forsyth and Benjamin Wilson, First judicial decision on a mortgagee sale during COVID-19 restrictions (1 August 2022) Hall & Wilcox <https://hallandwilcox.com.au/thinking/first-judicial- decision-on-a-mortgagee-sale-during-covid-19-restrictions/> Cameron Cheetham et al, Mortgagor alleges duty of care breach during COVID-19 pandemic property sale (19 August 2022) Corrs Chambers Westgarth <https://www.corrs.com.au/insights/mortgagor-alleges-duty-of- care-breach-during-covid-19-pandemic-property-sale>
Ted Fitzgerald Partner KordaMentha
Consequently, distressed sales are increasing and many predict this to continue into 2024. With this in mind, all lenders (both banks and non-banks) need to ensure they understand their statutory obligations should they need to enforce on their security. Among the most important are those found within Section 420A of the Corporations Act. The legislation outlines the obligations faced by a lender or its appointed controller (receiver or agent for the mortgagee in possession) when enforcing on its security following a default and selling a property. On first reading, these obligations may appear simple. However, the legislation is not prescriptive on this matter. The devil here is in the finer details, determined through interpretation of the legal principle, which are tripping up a rising number of those new to the lending community. It may come as a surprise to some, for instance, that regardless of whether a final sale price satisfies all parties involved, a debtor may still be able to sue their lender for not following a particular process, dependent on the circumstances. In other words, there is no step-by-step process to follow, no checklist to point to if problems arise after a sale is over. Section 420A allows that different property characteristics demand different methods of sale, and the law views each case holistically and in isolation. The courts will consider whether the steps the lender, or their controller, took were reasonable and prudent in relation to that sale and property alone. The recent judgment in Manda Capital Holdings Pty Ltd v PEC Portfolio Springvale Pty Ltd demonstrates this acutely. The issue in the case involved whether the lender (Manda), or its legal team, “…failed to do what a reasonable and prudent person would do or has done what a reasonable or prudent person would refrain from doing in the circumstances.” The background to these proceedings involves Manda, an experienced non-bank lender, having advanced a $6.39 million loan to PEC for a Melbourne property, on which PEC defaulted some months later. Manda took possession of the property and
12 – November / December 2023
THE PROPERTY DEVELOPMENT REVIEW
Market Insights
NAVIGATING PEAKS AND VALLEYS: BRISBANE’S 2023 INNER-CITY APARTMENT MARKET REVIEW. As we approach the end of the year and Christmas looms, Brisbane’s inner-city apartment market reflects a year characterised by both unprecedented highs and emerging challenges.
Colliers
2
Inner Brisbane
Off-the-Plan Weighted Average Sale Price
$1,400,000
$1,313,418
James Matley Colliers Queensland Residential Site Sales Executive
$1,300,000
$1,197,277
$1,200,000
$1,114,488
$1,100,000
$1,036,936
$1,020,656
$1,019,629
$1,000,000
$920,655
$889,126
$890,127
$900,000
$808,403
$831,884
$829,876
$824,187
$816,096
$790,622
$749,829
$767,929
$800,000
$747,816
$736,065
$700,000
$644,877
$600,000
$500,000
$400,000
Quarterly Weighted Average Sale Price
Rolling Annual Avg Price
Source: Colliers & Urbis
attract institutional capital into the residential build to rent sector. There have been challenges with development approvals this year as the market transitions. In Q2 2023 we witnessed the lowest development approval rate since Q3 2019, with only 395 apartments approved, this decline indicates potential challenges in the supply pipeline. As the year concludes, the market outlook for 2024 looks like it will involve navigating uncertainties. Supply constraints are anticipated to persist through the first half of 2024 due to cost concerns and building uncertainties. Developers are exercising caution, holding off on new projects, with the expectation that market resilience will absorb any resulting price increases. Looking further forward into 2024, the market is poised for a delicate dance between peaks in pricing driving demand and falling supply, low sales rates, completions, and project construction commencements. Queensland’s economy will continue to benefit from substantial population growth, a resilient labour market, and international demand for energy resources. These factors along with record infrastructure spending in the lead up to the Brisbane 2032 Olympic Games will set the stage for Queensland’s economy in 2024. Steady demand from investors and local owner-occupiers, particularly downsizers, is expected to remain a defining feature. The market’s ability to adapt to emerging trends will shape the trajectory of Brisbane’s inner-city apartment landscape in the coming year.
This piece lightly delves into the insights gleaned from 2023, providing a broad overview of some key market indicators and a glimpse into the potential trends shaping the landscape in 2024. With interest rate rises and significant increases in construction costs, the residential market has shown resilience despite these challenges. This is due to continued underlying demand from local and interstate purchasers and the limited supply of existing and new housing stock for the growing population. Housing stock continues to sell at a faster pace in 2023 compared to previous years setting the stage for Brisbane seeing record-breaking highs over the year. The average sale prices for inner-city new apartment stock soared to new heights, reaching an impressive $1,726,574 in Q3 2023, with a rolling average of $1,182,309. Such an increase in median sale prices is directly attributed to premium high-end product that is making up the majority of new apartment sales within the market. The Inner Brisbane Weighted Average Sale Price Graph visually illustrates the trends in rolling and overall average sale prices, showcasing the market’s robust performance over the past year. In the rental market we saw a surge in rates and investor interest. Low vacancy rates have propelled a substantial 24 per cent growth in median weekly unit rental rates, rising from $433 to $537 over the 12 months leading up to mid-2023. This surge, accompanied by the potential for increased rental yields, is expected to rekindle investor interest in the new apartment market. As well as further
November / December 2023 – 13
MARKET MOVES
VIC
VENDOR/ PURCHASER AGENCY
DESCRIPTION
SALE $
Vicinity Centres offloaded a 50% stake in Roxburgh Village earlier this month to a Hong Kong-based investment firm, taking their assets under management to over $2 billion, with this sale reflecting a passing yield of 7.25%. An 18,224 sqm vacant aged care home was purchased by an international investor, who plans to refurbish and open the facility.
250 Somerton Road, Roxburgh Park
V: Vicinity Centres P: JY Group
CBRE's Simon Rooney and James Douglas
$123 million
296-303 Springvale Road, Donvale
V: Region Amber P: International Investor
CBRE's Marcello Caspani-Muti, Sandro Peluso and Jimmy Tat Cushman & Wakefield's Leon Ma, Oliver Hay, Daniel Wolman and Marcus Neill
$12 million
Circa $250 million
The mammoth 174.6-hectare Windermere housing estate has been offloaded by a Chinese developer. The estate is master planned for circa 4,700 dwellings.
V: Country Garden P: Frasers Property
Mambourin
V: Sydnicate managed by Northwest Healthcare Properties P: KM Property Funds (Managed by KordaMentha)
"The Epping Private Hospital and Medical Centre was offloaded by a syndicate managed by Northwest Healthcare Properties, representing the largest single healthcare real estate transaction over the past year to date.
Circa $80 million
Knight Frank's Sam Biggins and Trent Preece
230 Cooper Street, Epping
1360 & 1370 Mickleham Road, Craigieburn
A 8.09-hectare liquidated asset formerly owned by Porter Davis was sold by receivers and managers KPMG on behalf of the Commonwealth Bank.
V: Commonwealth Bank P: China-based Investor
CBRE's David Minty, Nathan Mufale and JJ Heng
$6 million
Colliers’ Ben Young and Chris Nanni in conjunction with Fitzroy’s Chris Kombi and Lewis Waddell
A vacant retail investment, primely located in the heart of Geelong’s CBD, just metres from Westfield Shopping sold under the hammer. The sale of a Bay Street retail property on a sharp 3.6% yield is the latest evidence of the emergence of the Brighton shopping strip as a popular location for investors in its own right.
P: Melbourne-based Investor
$2.525 million
79-81 Malop Street, Geelong
Fitzroys’ Mark Talbot and Tom Fisher
$1.085 million
336 Bay Street, Brighton
V: Private Vendor
A brand new state-of-the-art industrial facility in Epping that is found within Stage 2 of the Biodiversity Business Park was purchased by a Boston-based investment manager.
V: 99 Bikes Pty Ltd P: Cabot Properties
Knight Frank’s Scott Braithwaite and James Templeton
$37.69 million
18 Litoria Court, Epping
Stonebridge's Rorey James, Nic Hage and Kevin Tong, in conjunction with Wilson Property's Ben Wilson
The Dava Hotel, near Mount Martha in Victoria's Mornington Peninsula, set a new standard for pub investments by selling to a local buyer for $15.75 million with a 2.7% yield. The historic Greystones farm, which was built in 1840 and famously owned by Sir William Charles Angliss in the 1930s, has been purchased Chinese-backed Autumn Estate, making them the third owner in the property's 148-year history. The 12 Apostles Hot Springs and Resort development opportunity was sold to a Sydney- based multi-disciplinary Property company specialising in major residential development projects.
V: Chris & Peter Dash P: Local Buyer
$15.75 million
614 Esplanade, Mount Martha
Circa $80 million
V: Diana Gibson P: Autumn Estate
Colliers' James Beer and Thomas Quinn
565 Glenmore Road, Rowsley
Stonebridge Property Group's Julian White and Chao Zhang, in conjunction with HTL Property's Andrew Jolliffe and Andrew Jackson
V: Melbourne-based Property Consortium P: Sheargold
Undisclosed
Booringa Road, Princetown
SA
VENDOR/ PURCHASER
DESCRIPTION
AGENCY
SALE $
Knight Frank's Jack Dyson and Oliver Totani
A high-profile two-level corporate office building in Marleston formerly occupied by SA Lotteries sold.
188-192 Richmond Road, Marleston
Circa $5 million
P: Living Choice Australia
A 5,500 sqm former vehicle showroom was purchased by The City of Prospect, with plans to redevelop the site to support local amenities at Prospect Oval.
JLL's Ben Parkinson, Simon Hilmgard and Claudia Brace
$8.3 million
42-148 Main North Road, Prospect
P: The City of Prospect
ACT 8 Dickson Place, Dickson
VENDOR/ PURCHASER
DESCRIPTION
AGENCY
SALE $
P: Aware Super
CBRE's James Douglas, Nic Purdue, and Tristan Cotchett
Dickson Village sold in one of the years largest mixed-use deals. The top-tier mixed-use development reached completion in September 2023, featuring a retail centre anchored by Coles supermarket and 140 build-to-rent apartments, with the final sale price reflecting a circa 6% fully leased yield forecast.
$157.5 million
TAS
VENDOR/ PURCHASER
DESCRIPTION
AGENCY
SALE $
Coal River Valley
P: Eneavour Group
Langley & Co's Toby Langley
Hospitality and alcoholic drinks retailer, Endeavour Group, purchased a 57-hectare vineyard, Brownwood Valley, just north of Hobart in the Coal River Valley.
CIrca $6 million
14 – November / December 2023
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