14/11/2013 - 14:06

New apartment projects reach $3bn

14/11/2013 - 14:06

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Development activity in the Perth apartment market has risen to its highest level since the GFC, with national players getting more active in WA.

New apartment projects reach $3bn
LEAD DEVELOPMENT: St Mark’s is one of many apartment projects developed by market leader Finbar.

Development activity in the Perth apartment market has risen to its highest level since the GFC, with national players getting more active in WA.

More than 4,500 apartments are under construction or being actively marketed across Western Australia, research by Business News has found.

These projects, collectively worth about $3 billion, will support a big increase in inner-city living in Perth, and bring higher density developments to the suburbs.

Rivervale, Burswood and Subiaco are the apartment hot spots, though areas including Port Coogee, Fremantle and even Ellenbrook have attracted significant developments.

Listed company Finbar continues to be the largest player in the market, with $740 million worth of projects either under construction or with development approval and due to hit the market in coming months.

Other big developers are mostly local groups that traditionally have relied on syndications to raise funds from private investors.

The largest of these is Otan, which has five projects under way worth $288 million upon completion. These include North One in Subiaco and Freshwater in Claremont, where it has teamed up with project manager Aria Land.

Otan's partnership with the ISPT superannuation fund has bolstered its financial muscle.

Another major player is Psaros, which took a big leap last year when it signed up private equity groups Dorado and Alceon as investors in its projects (see page 20).

Match has also tapped the private equity market after striking a joint venture deal with Sirona Capital for the $141 million Heirloom project in central Fremantle.

Gary Dempsey Developments has become a significant player, after teaming up with joint venture partner AFG Property for the Taskers project in North Fremantle.

Mr Dempsey, who also has the Bluewater project in Scarborough, is one of just a handful of developers braving the luxury end of the market (see page 17).

The biggest international player is Singapore-backed Frasers Property, which is developing three apartment towers in East Perth next to its Frasers Suites hotel.

Asian investors are behind three other significant projects, including the newly launched Riverwood project in Burswood and the Oceanna29 apartments under construction in Scarborough.

Australand is the only major national player with a significant presence in the Perth market. It has three projects currently under way and plans to significantly ramp-up its activities.

Mirvac, which was a big player in the WA market before the GFC, is rumoured to be getting ready for the launch of two new apartment towers and low-rise residential in Burswood.

Finbar managing director Darren Pateman agrees the market is the most active it has been since the GFC, but has not reached the giddy heights of 2007 and 2008.

“It’s not quite as busy as the pre-GFC environment, when the local market was booming, everyone was scrambling to release product, and there was a lot more activity from the larger national developers,” Mr Pateman told Business News.

“Construction costs are still high, so that is a constraint on the market.

“I would suggest the largest constraint today is the fact the major banks are being very selective and there are effectively no second-tier lenders in the market.

“The industry is very much reliant on debt for construction finance, so this will prevent the same scramble that was evident during the boom.”

Like other established developers, Mr Pateman is looking for a sustainable recovery.

The key drivers of the apartment market are affordability and location, and that is why Rivervale has become a development hot spot, following a major investment by government agency LandCorp in the area.

Prices in Rivervale start from around $375,000 for a one-bedroom property.

With growing congestion on Perth’s freeways and limited amenity in the outer suburbs, buying an apartment has become more appealing for many people.

Asian investors and fly-in, fly-out workers continue to be important drivers of demand, particularly in the inner suburbs.

The pick-up in development activity during the past year is also compensating for the slowdown that followed the GFC, when developers struggled to gain access to finance.

Pricing continues to be a critical factor in the success of apartment projects.

Finbar’s high-rise Toccata project, for instance, was initially expected to deliver $120 million in sales proceeds.

The developer has redesigned the project to make it more affordable, and now expects to generate sales of $85 million from the 46 apartments, although Mr Pateman added Finbar’s margins would be maintained.

Future supply

One of the challenges for developers is to have a pipeline of projects beyond those currently under construction or about to hit the market.

Finbar has plans for projects in the city, Rivervale, Maylands, Dianella, and West Perth that will deliver more than 1,000 apartments over the next few years.

This week, it purchased a development site in Northbridge, which Mr Pateman said would contribute to the group’s earnings in the 2017 financial year.

Subject to gaining planning scheme amendments, Finbar will also look to proceed with its Anchorage apartment project in Port Hedland, following completion of the Pelago development in Karratha.

Lend Lease project

A new competitor in the inner city will be national player Lend Lease, which is developing the six-hectare Waterbank site near The Causeway.

Lend Lease is working with architecture firm Hassell on the master plan design for the area.

Apartment sales at Waterbank are scheduled to begin in the middle of next year, with construction to follow a few months later.

Lend Lease anticipates the area will provide about 600 dwellings for 1,500 people.

Singapore-based Golden Group has even more ambitious plans for its project at Belmont Park racecourse, after making a $51 million down payment to Perth Racing earlier this year.

It has plans for up to 4,000 apartments, starting with high-rise towers at the eastern end of the racetrack.

Another group with big, and much more specific, growth plans is national player Australand.

It plans to develop 400 new apartments at Cockburn Central, in The Link and The Junction, which are currently in the design phase.

It also has plans for more than 600 apartments at Port Coogee, at the Pantheon, Calypso and Beachside developments.

TRG expansion

Local developer TRG Properties is also active at Port Coogee.

Managing director Simon Trevisan said its $75 million Ocean Edge development, currently under construction, would be followed by the Marina Edge project, more than double the size.

TRG is also active at Perry Lakes, where it will follow its $30 million Podium Terraces development with the $100 million Empire Residences.

In addition, TRG is planning another apartment development at Ellenbrook with its joint venture partner Development Australia Corporation.

Not content with that, TRG is also planning a joint venture development with AMP Capital at the Garden City shopping centre in Booragoon.

Stage one of this development would involve the construction of 120 apartments worth approximately $100 million.

This follows TRG’s purchase last year of the Alcoa office building and surrounding land at Booragoon, and takes advantage of state government planning policy that encourages medium-density residential developments in tandem with major shopping centre expansions.

 


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