Ray White Auction

From Ray White:  "The Urban Living Group auctions were held last Saturday at The Emporium Hotel where 52 properties went up for sale under the hammer.  A great day was had with a crowd of over 200 people attending the event and 79 registered bidders on the day.  The auctions kicked off with a bang selling 7 out of the first 8 properties, with 13 out of the 26 in the first section selling at a 50% success rate. The second section of the day was far tougher with 7 out of the 26 properties selling under the hammer, but with negotiations on multiple properties we believe we will have over 80% sold by the end of next week."

Charlotte Towers

Apt 3101 sold for $313,000 (1 bed, no car)

Aurora

Apt 236 passed in at $490,000, now listed for sale at $525,000 (2 bed, 2 bath, 1 car)

Apt 458 passed in at $450,000, now listed for sale at $480,000 (2 bed, 1 bath, 1 car)

Apt 534 passed in at $925,000

212 Margaret

Apt 2103 passed in at $340,000, now listed at $375,000 (1 bed, 1 bath, 1 car)

Admiralty Quays

Apt 67 at 32 Macrossan St did not sell at $560,000 (1 bed, 1 bath), but now listed as sold.

Charlotte Towers View and Sale

Recently, apartment 1009 in Devine's Charlotte Towers sold for $366,000. This is a larger one bedroom apartment with a car park. It is on level 10. The building is managed by Oaks. Unfortunately, its view will be impacted by the new The Midtown development across the road. Construction can be seen from this photo from apartment 1009. This type of apartment has sold for as high as $430,000 in the past -- so one can see that there has been a 10% to 20% decline in prices in this building since the peak of the market.

Midtown on Charlotte Street

"Chinese-owned development and construction firm Yanjian Australia has started work on a $72 million, 142-apartment building in Charlotte St in the Brisbane CBD, which it will fund entirely with its own equity.

It will be the first new apartment project in the heart of the Brisbane CBD for nearly four years. ...

Yanjian's Brisbane-based managing director Marcus Ng said the building, to be known as Midtown, would offer apartments ranging in price from $220,000 to $720,000."

Source: Brisbane Times

Recent Brisbane Auction Results

Just over a week ago, Ray White had an auction where 12 Brisbane inner city apartments went to auction. Only one sold at auction (1201 in UniLodge for just over $100,000). Over a week after the auction, most of the apartments that did not sell at the auction are still listed for sale. Why vendors decide to go to auction in Brisbane amazes me. These apartments are not selling at the prices listed below, so the market must be saying that they are worth less than this. And why buy an off the plan apartment for more than these prices? Some examples of the many apartments that Ray White was unable to sell:

• Felix, Apt 121, 1 bed, no car - failed to sell at or after auction, now listed for $330,000
• Felix, Apt 147, 2 bed, 2 bath, 1 car, end apartment - failed to sell at or after auction, now listed for $470,000
• Charlotte Towers, Apt 605, 1 bed, no car - failed to sell at or after auction, now listed for $315,000
• Charlotte Towers, Apt 2401, 1 bed, 1 car - failed to sell at or after auction, now listed for at the unrealistic price of $410,000
• Festival Towers, Apt 906, 1 bed, no car - failed to sell at or after auction, now listed for $320,000
• River Park Central - Apt 603, 2 bed, 2 bath - failed to sell at or after auction, now listed for $410,000
• River City, Apt 1803, 2 bed, 2 bath - failed to sell at or after auction, now listed for $433,000
• Aurora, Apt 626, 3 bed - failed to sell at or after auction, now listed for $1,300,000
• Grosvenor, Apt 1504, 3 bed - - failed to sell at or after auction, now listed for $1,800,000

A New Vision 111+222

A new development application has been lodged for the Vision site (where the Vision building was planned, with many apartments over $1M being sold off-the-plan in 2006 to 2009).

The new development consists of two buildings, and is called 111+222. It is located on 111 Mary St and 222 Margaret St. Registrations are already being taken for off-the-plan sales.

222 Margaret St Tower:

•The taller tower is currently known as 222 Margaret Street and is 90 levels (297m) in height.
•A 5 star 380 room hotel is proposed for this tower, however the hotel operator is not yet known.
◦The hotel will have a ballroom.
•The tower will mostly comprise of 790 one, two and three bedroom residential apartments over the 90 floors.
•Restaurants & bars will be situated throughout the project with a key cross block link from Mary to Margaret Street to be established in stage 1.
•Depending on if the tower's 297m height is AGL (above ground level), 222 Margaret St will share the title of Australia's tallest tower with Eureka Tower - currently the tallest in Australia.
•It is not yet known if there will be an observation deck at the top - similar to what it's predecessor, Vision had.

111 Mary St Tower:
•111 Margaret St tower is the smallest of the two, rising 34 levels.
•This tower will be completely office.
•AMP Capital is funding this part of the development
•980 car spaces will be built across eight underground levels.
The development has been designed by Bates Smart Architects and boasts a glass cylinder like design for the taller building. Billbergia will lodge the development application this week after releasing the plans to the media.

See Brisbane Times and Brisbane Development and Courier Mail.

The development is receiving significant interest.

It will have an impact on a number of apartment buildings, especially 212 Margaret next door, and will block views from Charlotte Towers to the park.


Updated Post: Click Here.

Sales in Charlotte Towers and Festival Towers

The following are all reported sales from December 2010 to now in Charlotte Towers and Festival Towers.

Charlotte Towers, 128 Charlotte St, Brisbane

Apt 3607, 2 bed, 1 bath, high floor, western side, $430,000

Apt 2407, 2 bed $520,000

Apt 803, 2 bed, 1 bath, low floor, overlooking Wintergarden $429,000

Apt 2805, 1 bed, 1 bath, 1 car, overlooking Wintergarden $350,000

Apt 1404, 1 bed, 1 bath, no car, overlooking Wintergarden $350,000

There are one bedrooms without car parking available in Charlotte Towers for sale for less than $300,000. For example, this apartment is listed at $299,000. Or $320,000. Or $325,000.

Festival Towers, 108 Albert St, Brisbane

Apt 202, 2 bed, 2 bath, 2 level, can be used for commercial premises $550,000

Apt 4108, $649,000

Apt 1511, 1 bedroom, $350,000

Apt 2209, 2 bed, 2 bath, $473,000

Oaks

The Oaks Group manages a number of Brisbane apartments, including Charlotte Towers, Aurora, Festival Towers and Felix.

The Australian reports:

"Auditors had also warned of "inherent uncertainty" regarding Oaks's ability to continue as a going concern, with the company owing more than $70m to ANZ and NAB banks."

See The Australian

"The directors of Oaks yesterday proved they had not given up, issuing a brief statement to say that the company had been presented with a counter takeover offer believed to be pitched at 60 cents which it was examining."

Courier Mail

Oaks In Financial Troubles?

Oak's financial model is very precarious. Oaks makes its profit from renting apartments owned by others. All owners of apartments that Oaks manage as their real estate agent can terminate their appointment of Oaks on 90 days notice or less.

Extension to Finance Facilities

Oaks has successfully obtained an extension of its finance facilities to 28 February 2011 as it works through a refinancing process. Oaks' debt levels as at 31 December 2010 is approximately $76 million. Oaks is trying to raise not less than $15 million to be applied towards debt reduction.

Receivers appointed to one of Oaks' substantial shareholders

On 27 January 2011, a notice was lodged with ASX by the receives and managers of The Oaks Apartment Management Pty Ltd and Centrepoint Holdings Pty Ltd, companies associated with the CEO of Oaks, Mr Brett Pointon. These two companies hold over 36% of Oaks' share capital.

Oaks' shares dropped 23% on Friday. See The Age & Courier Mail story.

Colin Archer from Archers Body Corporate Services is a director of Oaks.

Oaks is the onsite caretaker and letting agent for Charlotte Towers, Festival Towers, Casino Towers and Felix.

Oaks profit crashed from $9.7m (2009) to $3.9M (2010). As a result, Oaks did some restructuring, including centralisation of all reservations (which is not always good for the landlords who have appointed Oaks to manage their apartment) and the formation of Housekeepers Pty Ltd as a profit centre in its own right to replace external cleaners and lift levels of service (which sounds like an admission that housekeeping and maintenance was not well done in the past). This raises issues for the body corporate and owners, if the onsite caretaker (Oaks) is contracting Housekeepers to do maintenance paid for by the body corporate.

Brett Pointon's company, Collections Enterprises Pty Ltd, purchased 4 management rights from Oaks in 2009, including 212 Margaret, which was badly damaged in the flood, and Lexicon.

Lots of related party transactions. Not good financial management by Pointon. He is trumpeted as the brains behind Oaks. Sounds like one should avoid doing business with Oaks or investing in Oaks!

From the Oaks website:

"The principles and ethics that firmly ground The Oaks Group were laid down by CEO Brett Pointon over many years of personal experience in strata-titled property management. The group’s impressive increase in its portfolio of properties under management since its foundation in the early 1990’s is thus anchored to astute knowledge of this unique industry. Known for his pro-active, hands on approach, Brett Pointon leads by example, creating an environment in which innovation in marketing is balanced by the utilisation of proven strategic planning systems."

The Midtown

Demolition has started for a new apartment building at 127 Charlotte Street, directly opposition Charlotte Towers. (Charlotte Towers is being surrounded - don't buy in Charlotte Towers for the views!) The building is called The Midtown, and will consist of studio, one and two bed apartments.

Capital Growth

In December's Australian Property Investor magazine, there is a chart from Collier's that lists average capital growth and average hold years for certain Brisbane apartments, as at August 2010. The capital growth period and methodology to produce these figures is not disclosed:

Casino Towers - 5.9%, 3.7 years average hold

Aurora - 5.4%, 3.6 years average hold

Felix - 5.25%, 3.8 years average hold

Quay West - 4.9%, 5.1 years average hold

Festival Towers - 2.3%, 3.9 years average hold

M on Mary - 1.1%, 2.9 years average hold

Charlotte Towers, 0.9%, 3.5 years average hold.

My guess is that the hold period is calculated from when the off-the-plan contract is signed, not when settlement takes place.

Off-the-plan investors in Devine's Festival Towers and Charlotte Towers have clearly lost money. A word of warning for investors in Devine's Hamilton Harbour. Devine's Casino Towers has done ok, but that is unlikely to be repeated now that Jupiters is building a massive hotel across from Casino Towers that will block much of this buildings river views (but not the western sun). Out of this group, my pick would be Quay West -- only 132 apartments, with a long hold period and good capital growth, never to be built out views.

Risks With Short Term Rental Buildings

When I am looking to buy an apartment in Brisbane, I look at Trip Advisor to see if there are reviews about the apartment building and the onsite manager. As a general rule, if the apartment building is listed with TripAdvisor, I will only buy if I am seeking a non-residental investment. There is limited resale opportunities for short term non-residential buildings.

Example Reviews:

• 212 Margaret
• Casino Towers
• Aurora
• Charlotte Towers
• RiverCity
• M on Mary
• Evolution
• Felix
• Festival Towers
• Skyline

Many reviews highlight the problems -- these buildings were designed for residential apartment living, not as hotels. People ask for adjoining rooms, and don't get them (of course). Items from rooms are stolen. Linen trolleys and food trays are left in hallways, as there are no service cupboards or service rooms for hotel staff. Furniture breaks, as the apartments were furnished for residents, not using hotel quality furniture. No minibars. Parking problems. I wonder what the owners of these apartments think about their real estate agents who are managing their investment -- a real estate agent pretending to be a hotel company.

I love this recent review for Evolution: "What a disaster. We never new accomadation could be so foul .. so many light bulbs broken, Filthy carpets, No drinking glasses (even when you ring & ask a certain staff member who couldn't have been any more passive agressive they still don't come) We changed rooms which was even worse, kitchen tap fell off in our hand, no shower door as it had broken off, huge rip in the lounge, even filthier carpets, rug all ripped, more light bulbs out, TV not tuned so most of the channels hissed at you a lot like most of the staff.. broken light shades, blind pullies broken. When we checked in they held on our credit card $200 for breakages.. there was nothing left TO BREAK!! This place is not rateable unless there is a minus."

Why would anyone want to buy in this building?

Recent Apartment Sales in Brisbane City

Casino Towers (151 George Street)

• Apt 1205, 1 bed, 1 bath, no car - sold for $350,000
• Apt 1902, 2 bed, 2 bath, 1 car, river views - sold for $660,000
• Apt 3205, 2 bed, 1 bath, 1 car - sold for $520,000

The Gardens (204 Alice Street)

• 2 bed, 2 bath, 1 car - 7th floor, sold for $475,000
• 1 bed, 1 bath, 1 car - sold for $345,000

RiverCity (79 Albert Street)

• Apt 1903, 2 bed, 2 bath, 1 car - sold for $460,000

Charlotte Towers (128 Charlotte Street)

• Apt 2809, 1 bed, 1 bath, 1 car passed in at auction - auctioneer's bid of $395,000

Charlotte Towers and Vision

This is a photo taken today of Charlotte Towers, from Margaret Street, with the Vision hole in the foreground. Vision Brisbane is under administration.

Will Brisbane Apartment Prices Rise or Fall in 2010?

I do not know! The messages are mixed at present. My predication is that some buildings will have average price growth, while other buildings (e.g., those with a large number and % of investor apartments -- e.g. Aurora and Charlotte Towers -- or those that were aggressively sold off the plan during the boom -- e.g. Evolution) will have no price growth or price decreases.

Factors suggesting price increases for Brisbane apartments include:

• increased migration to Brisbane
• mining sector likely to remain strong
• few large new apartment buildings being completed in the next 18 months
• net returns of 5% or better for some apartments

Factors suggesting no price increases (or possible price decreases) for Brisbane apartments include:

• likely interest rate increases in 2010
• rents unlikely to increase significantly in 2010, and may even decrease for some buildings/areas
• lack of first home buyers, many of whom purchase apartments
• investors only purchasing when the price is right or the seller is desperate
• difficulties for investors getting loans
• banks are requiring a higher % of down payment, so investors have less to spend
• valuations are more conservative, making it harder for investors to obtain highly geared loans
• difficulties redrawing against existing loans to invest, because property prices have not increased significantly in recent times

Risks for the investor in Brisbane include:

• foreign students loosing interest in Brisbane or Australia -- as they make up a significant percentage of renters
• wages stagnate -- affordability (% of wages spent on property) already stretched, so unless wages increase, it is unlikely that property prices will increase significantly
• council rates increasing
• body corporate levies are already high (over $6,000 a year in some buildings), and may increase more this year
• federal government limiting or removing ability to negatively gear or claim depreciation
• unemployment increases

Charlotte Towers For Sale

Following on from the post listing Charlotte Towers apartments that sold in 2009, I noticed that there are a huge number of 1 bedroom apartments currently listed for sale in this building. Most do not have a car park. In my view, a one bed in Charlotte Towers without a car park is worth about $305,000 to $325,000, depending on floor and view. There are a number of other buildings in the city area where there are no apartments for sale at all.

• $365,000
• $369,000
• $389,000
• $400,000
• $350,000
• $365,000
• $400,000
• $440,000 with car
• $370,000
• the list goes on and on

Take Care!

Charlotte Towers Sales in 2009

Charlotte Towers, at 128 Charlotte Street, Brisbane has had over 40 sales in 2009, which is almost one a week. Most of the owners are investors who do not live in the building. The building has one and two bedroom apartments. Some do not have carparks.

• Lot 502, sold in June for $522,500
• Lot 603, sold in May for $410,000
• Lot 604, sold in April for $317,000
• Lot 701, sold in March for $345,000
• Lot 704, sold in March for $305,000
• Lot 807, sold in September for $450,000
• Lot 1005, sold in March for $295,000
• Lot 1107, sold in March for $450,000
• Lot 1202, sold in June for $480,000
• Lot 1203, sold in April for $437,000
• Lot 1502, sold in May for $480,000
• Lot 1503, sold in June for $445,000
• Lot 1508, sold in July for $473,000
• Lot 1510, sold in March for $325,000
• Lot 1609, sold in October for $358,000
• Lot 1703, sold in February for $450,000
• Lot 1706, sold in February for $325,000
• Lot 2006, sold in October for $328,000
• Lot 2101, sold in October for $420,000
• Lot 2107, sold in September for $495,000
• Lot 2210, sold in January for $312,000
• Lot 2302, sold in March for $468,000
• Lot 2307, sold in May for $490,000
• Lot 2308, sold in February for $485,000
• Lot 2310, sold in July for $346,000
• Lot 2408, sold in April for $495,000
• Lot 2501, sold in June for $418,000
• Lot 2604, sold in July for $348,000
• Lot 2608, sold in August for $492,500
• Lot 2708, sold in May for $490,000
• Lot 3007, sold in February for $485,000
• Lot 3302, sold in August for $320,000
• Lot 3310, sold in February for $358,000
• Lot 3401, sold in July for $355,000
• Lot 3412, sold in May for $360,000
• Lot 3811, sold in September for $347,000
• Lot 4110, sold in April for $433,000
• Lot 4112, sold in August for $463,000
• Lot 4209, sold in April for $425,000
• Lot 4308, sold in February for $717,000

Take Care Buying Off the Plan

If you believe the sales agents hired by developers who sell apartments in Brisbane off-the-plan, you can't go wrong. Sign today, but don't pay for a few years. Population growth. Depreciation benefits. Get is early to choose the best apartment. Early buyers will get the best price. There will be a price rise soon, so sign today!

But there are huge risks:

• the building may never start, and so the deposit is tied up for years
• the apartment may look different to what you expect, or have a worse view
• there could be development next door, impacting your view and the location
• the developer could onsell the development, and so you end up buying from someone other than who you signed with
• the apartment may be up to 5% smaller than set out in the marketing plans
• the quality may be different to what you expect.

However, the biggest risk is that you pay the wrong price. You are trying to guess tomorrow's price today. And let me tell you, prices do go down. In addition, you are paying for the developers marketing and sales costs, which is often more than 5% of the the purchase price. So you are 5% behind before you start.

Let's look at some examples of buildings marketed off-the-plan to see how the purchasers did.

Devine is selling Hamilton Harbour like hot cakes. Let's see their track record. Here are some example resales for Charlotte Towers, their most recent Brisbane apartment development. I have looked at typical midlevel apartments:

Apt 2003 - purchased Jan 05 for $444K, resold July 08 for $425K

Apt 2210 - purchased Dec 04 for $333K, resold Jan 09 for $312K

Apt 2302 - purchased March 07 for $483K, resold March 09 for $468K

Apt 2307 - purchased Sept 06 for $497K, resold May 09 for $490K

Apt 2308 - purchased Sept 05 for $501K, resold Feb 09 for $485K

Apt 2410 - purchased Dec 04 for $351K, resold March 08 for $310K

Apt 2608 - purchased Sept 04 for $508K, resold Aug 09 for $492.5K

Apt 2703 - purchased March 06 for $492K, resold Feb 08 for $461K

Apt 2908 - purchased Feb 05 for $508K, resold Nov 08 for $485K

Keep in mind the the purchasers paid stamp duty of between $5,000 and $15,000 and agents fees to sell the apartment of roughly $12,000, then you can see that many of the off-the-plan purchasers lost more than $30,000, after holding for 3 to 5 years.

Another example is FKP's Vue apartments, at 92 Quay Street, Brisbane.

Apt 1106 - purchased Oct 04 for $400K, resold July 07 for $368K

Apt 1205 - purchased Oct 04 for $475K, resold July 07 for $440K

Apt 2008 - purchased Jan 05 for $504K, resold Aug 08 for $480K

Apt 2409 - purchased June 06 for $535K, resold Feb 09 for $445K

So take extreme care building off the plan, as you may end up paying too much for something that you don't like or want.

Oaks 08/09 Results

Oaks Hotels & Resorts Ltd net profit was down 33.3% to $9.8 million in the year to June 30, 2009, on revenue up 11.5% to $120.9 million.

• 38 properties under management
• 4,788 serviced rooms under management (12% increase over last FY)
• occupancy rate down 2.11% to 84.38 for CBD properties
• average room rate $151 for CBD properties
• new central reservations team -- I wonder what owners are being charged for this?

Recent Brisbane Apartment Sales

• Admiralty Quays, Apt 164: 4 bedrooms, 3 bathrooms, 2 cars - $2,200,000
• Admiralty Quays, Apt 90: 1 bedroom, 1 bathroom, 1 car - $580,000
• 212 Margaret Street, Apt 47, 2 bed, 1 bath, 1 car - $465,000
• Willahra Towers, Apt 26, 2 bed, 2 bath, 1 car (76m2 internal, 36m2 external. Total area 112m2; white-goods included) - $435,000
  
• Parklands 3, Apt 4073: 1 bed, 1 bath, 1 car - $365,000
• Charlotte Towers, Apt 2305: 1 bed, 1 bath, 1 car - $354,000
• Casino Towers, Apt 3304: 1 bed, 1 bath, 1 car - $339,998
• River City, Apt 1005: 1 bedroom, no car, view straight into neighbouring building - $305,000

Oaks "Hotels"

If you are thinking of buying or renting in an apartment managed by Oaks, then you should read the online reviews written by people staying in the building, who are short stay "hotel" guests. The problem with Oaks buildings is that they were built as cheap apartment buildings (not as hotels) but a large number of rooms are rented out (often for a night at a time, via Wotif) to people who think they are staying in a hotel. Thus, both residents and "hotel" guests are often not happy.

Example Reviews:
Aurora
212 Margaret
Festival Towers
Casino Towers
Charlotte Towers
Felix
Lexicon
River City

Similar issues for M on Mary.