Overseas buyers chase bargains

OFFSHORE investors are targeting the assets of distressed property investment funds, while listed developers have restructured their debt and are ready to chase bargains in Perth’s residential development land market, new research shows.

Research released this week by market analysts Jones Lang LaSalle indicated that there have been more than $150 million of development land sales over the past three months.

High-value sales include the Emu Brewery site on Mounts Bay Road to Singaporean investors for around $50 million; SAS Global’s former OneSteel site in North Fremantle to a Chinese investor for $30 million; The May Holman Centre on St Georges Terrace for $32 million to Mimi Wong’s Golden Group; and Centro North in Subiaco for $20 million to Qube Property Group and Pindan.

Turnstone Nominees – a joint venture between Saville Australia and Babcock & Brown – previously purchased the Spring Street Emu Brewery site for $48.8 million from failed development Group Westpoint in 2006. Turnstone was placed in receivership in early 2008.

SAS Global subsidiary, SAS Global Mosman Park Equity, bought the OneSteel site from developer Michael Hodgson for $61 million in May 2007. The firm was placed in administration in November last year.

Jones Lang LaSalle sales and investments manager, Phil Fogliani, said the downturn of broad acre land values since the global financial crisis had boosted transaction levels, which had also been triggered by strong economic growth in Western Australia.

In the last two years, residential land parcels have come back in value 27.5 per cent to an average of $770,000 per hectare, down from an average of $1.05 million per ha in 2007.

“We are seeing strong appetite from buyers for residential development land, or englobo land as its known in the market,” Mr Fogliani said.

“Buyers in the current market are looking for land from anywhere between $2 million and upwards of $100 million.

“These buyers are ranging from Asian cash investors, who have snapped up a number of sites around Perth recently, to syndicates who have re-emerged in the market with access to equity funding, along with well capitalised publicly listed companies.”

Mr Fogliani said the market had also recently been defined by an increase of deals being structured to overcome debt-funding issues.

“Vendors and purchasers are becoming more creative and we are seeing innovative deal structures such as vendor backed loans,” he said.

“Staged payments are more prevalent and joint ventures are becoming more common in the market again.

“The Alkimos residential development joint venture between the state government and Delfin Lend Lease is a classic case in point. Stockland’s partnership with Eglinton Estates is another.”