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?

96 Albert Street

The property located at 96 Albert Street is listed for sale as a development site, zoned for high rise development. If developed, this will have a significant impact on the views from Festival Towers and M on Mary.

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?

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.

Brisbane Apartment Videos

Meriton's Soleil

Trilogy

Festival Towers

Charlotte Towers

Please Take Me To Brisbane

Brisbane

Ray White Sunday Auction Results

See Courier Mail blog

• Felix: 342/26 Felix St, 2 bed, 2 bath, sold for $495,000.
• Festival Towers, 1901/108 Albert St, passed in $450,000
• Festival Towers, 3508/108 Albert St sold prior to auction, reported at $555,000 or $445,000??
  
• Charlotte Towers, 1502/128 Charlotte St, 2 bed 2 bath, passed in on vendor’s bid of $420,000
• River Place River Terrace House: 1/82 Boundary St was passed in at $1.35 million, now listed at $1.5M
• Skyline, 12/30 Macrossan St, three bedroom unit passed in at $900,000, now listed at $1,240,000
  
• Aurora Tower Penthouse: 651 and 656/420 Queen St passed in at $2.4 million, now listed at $2.6M
  
• Soho, 416/8 Cordelia St, 1 bed, South Brisbane was passed in at $280,000
• SoHo, 615/8 Cordelia St was passed in for $465,000, looking for offers above $500,000
  
• SoHo, 108/8 Cordelia St passed in at $505,000
• Euro, 1308-2-6 Manning St, South Brisbane, 2 bed 2 bath, passed in at $400,000
• Trilogy, 336/51 Hope Street, Spring Hill, 2 bed, 2 bath passed in at $540,000, sold after for $550,000 (vendor was off the plan owner who had paid $595,000)
  
• Stradbroke Tower, 74/2 Goodwin St, Kangaroo Point passed in at $875,000
• 1/24 Brisbane Street, St Lucia, sold for $414,000
• 6/211 Baroona Rd Paddington, 2 bed, 1 bath, sold for $431,000
• LeftBank, 64/35 Buchanan St, West End, passed in at $1.15 million

"Hundreds turned out to the convention centre on Sunday to see 80 properties offered for sale as part of the Ray White Property Auction Spectacular. There was a wide range of units and houses was on offer but properties sold under the hammer for prices well below what would have been expected six months ago.
Chief auctioneer Philip Parker said he pleased with the lacklustre clearance rate of almost 30 percent but said those who sold at auction realised they were not going to get what they thought their property was worth before the economic downturn. He said while no-one was happy with the current economic climate, sellers realised if they wanted to move a property they had to meet the market.
``Out of those that sold today, only one buyer didn’t go down on their original (minimum) price,’’ Mr Parker said.
He said the vendors who didn’t budge, didn’t get a sale. Negotiations are continuing on several properties offered for sale." http://blogs.news.com.au/couriermail/publicproperty/index.php

Brisbane Apartment Auction Results

• River City Apartments, Apt 2105, 2 bedroom, 2 bathroom, 1 car, sold at auction for $375,000
• Aurora Skyhome, Apt 547, three bedrooms, passed in at auction with highest bid of $740,000
• Charlotte Towers, Apt 1810, passed in at auction with highest bid of $290,000
• Charlotte Towers, Apt 3811, passed in at auction with highest bid of $310,000
• Festival Towers, Apt 2806, 1 bed, 1 bath, 1 car - no bid at auction

Westin to Block Casino Towers and Festival Towers views

Here is a photograph that I took today from the South side of the Brisbane River.

Brisbane City

Casino Towers is the tallest looking building, in the centre of the photo. (Casino Towers is 120 metres high). To the left of Casino Towers, you can see Festival Towers. The Casino is the old building in the foreground. Number 111 George Street is on the far right (145 metres).

Below, is a similar photo, showing the planned Westin Empire Square building. As you can see, Festival Towers will be impacted (you can't even see it in the photo below), and many apartments in that building that have river views today may not have river views when the Westin is complete. The Westin Empire Square will be 62 levels and 220 metres high. Also, a number of the "back" apartments in Casino Towers will have their views taken away by the Westin Empire Square.

Westin - Empire Square

AFR - RP Data Brisbane Apartment Survey 2007

Building	Number of Resales	Median Annualised Capital Growth	Median hold period
Riparian Plaza	4	24.8%	2.8 years
Grosvenor	7	11.9%	3.7 years
Admiralty Towers	10	9%	6 years
KoKo	15	7.6%	2.3 years
Quay West	13	6.1%	11.1 years
Festival Towers	61	2.3%	3.9 years
Charlotte Towers	13	0.8%	2.9 years

Capital Growth is only for apartments that were sold in 2007. The median hold period includes time held from original off-the-plan contract date to sale.

Auction - Ray White Spectacular

Auction - 20 April 2008

112 properties listed for sale, including 26 vacant lots on Russell Island and 6 rural properties.
10 out of 80 residentials sold prior to auction
18 out of 70 sold at auction
21 sold within a week after auction.

According to Ray White, the day proved a good "educational process. .. Buyers are more discerning. ... some vendors are not yet in tune with the slight change in the market."

There were about 10 apartments that went to auction, including one in Skyline and some in Aurora and Festival.

Losses at Devine's Festival Towers

As far as I can tell, many early off-the-plan purchasers of apartments at Devine's Festival Towers at 108 Albert Street, Brisbane have made no money (or losses) on resales, particularly if you take into account stamp duty and agents fees.

Some examples:

• Apt 3601, purchased off-the-plan in April 2004 for $468,000, resold in October 2007 for $495,000
• Apt 3209, purchased off-the-plan in September 2003 for $491,000, resold in May 2007 for $505,000
• Apt 3201, purchased off-the-plan in September 2003 for $457,000, resold in July 2007 for $460,800
• Apt 3109, purchased off-the-plan in September 2003 for $483,000, resold in October 2007 for $475,000
• Apt 3101, purchased off-the-plan in September 2003 for $455,000, resold in March 2007 for $415,000
• Apt 3003, purchased off-the-plan in September 2003 for $414,000, resold in October 2007 for $435,000
• Apt 2903, purchased off-the-plan in October 2003 for $380,000, resold in October 2007 for $418,000.
• Apt 2902, purchased off-the-plan in September 2003 for $440,000, resold in October 2007 for $485,000
• Apt 2601, purchased off-the-plan in October 2003 for $441,000, resold in November 2007 for $460,000
• Apt 2501, purchased off-the-plan in October 2003 for $443,000, resold in February 2007 for $440,000
• Apt 2403, purchased off-the-plan in November 2003 for $369,000, resold in November 2007 for $435,000
• Apt 2303, purchased off-the-plan in September 2003 for $365,000, resold in June 2007 for $389,000
• Apt 2505, purchased off-the-plan in November 2003 for $301,000, resold in April 2007 for $294,500
• Apt 2404, purchased off-the-plan in September 2003 for $293,000, resold in November 2007 for $323,000
• Apt 2105, purchased off-the-plan in September 2003 for $296,000, resold in October 2007 for $310,000
• Apt 2006, purchased off-the-plan in September 2003 for $300,000, resold in October 2007 for $305,000
• Apt 1706, purchased off-the-plan in October 2003 for $296,000, resold in September 2007 for $305,000
• Apt 1501, purchased off-the-plan in October 2003 for $407,000, resold in April 2007 for $417,000
• Apt 608, purchased off-the-plan in February 2004 for $398,000, resold in October 2007 for $410,000

So take care when purchasing off-the-plan. Not everyone makes money. And with M on Mary and the proposed Empire Square blocking views from Festival Towers, it could get worse rather than better over time for some owners.

Not A Good Week for Auctions in Brisbane

This week (ending 8 March), auction results for apartments in Brisbane were not good.

At a midweek Ray White auction, there was good attendance. But mostly people watching the market. There were few active buyers.

Results of the midweek Ray White Auction

Charlotte Towers (128 Charlotte Street, Brisbane)

Apartment 3801 - Level 38 - 1 bed plus study - 57 sqm - no car park - sold at auction for $320,000
Apartment 3105 - Level 31 - 1 bed with big storage room - 60 sqm - no car park - not sold
Apartment 2410 - Level 24 - 1 bed with large shower - 61 sqm - no car park - sold at auction for $310,000

212 Margaret Street
Apartment 1504 - not sold

River Park Central (120 Mary Street)
Apartment 602 - 2 bed, 2 bath, 1 car - 85 sqm - not sold at auction - now listed for $420,000

Saturday Auction (Brisbane clearance rates were a low 44%; national clearance rates

Elysees (15 Walsh Street, Milton)
Apt 33, Penthouse - 3 bed, 2 bath, 2 car - no bids at auction - now listed for $969,000

15 February Ray White Auction

Tempo (West End)
75/20 Donkin Street, 3 bed, 2 bath, 2 car - not sold - vendor bid of $800,000 - still listed for sale.

Other recent sales in Brisbane:

• River Place, 1 bedroom with river view - Unit Type N (about 62 sqm including balcony) - no car park - Apt 116 - $370,000
• Charlotte Towers, 2 bedrooms, 1 bath, 1 car - 27th floor - apartment 2703, 82sqm total including alfresco dining area - $461,000
• Aurora - 2 bed, 2 bath, 1 car, Apt 301, 107 sqm including balcony, listed at $600,000, sold for $570,000
• Festival Towers, 2 bed, 2 bath, 1 car, Apt 1208, listed at $428,000, sold for $415,000 (one of the best floor plans in Festival Towers, 83 sqm plus small 3 sqm balcony, but now has no view as it looks into M on Mary).

Average price per sqm for these four recent sales (including balcony area) is $5,427. Festival and Charlotte are B minus buildings, Aurora is a B building, and River Place a B plus (due to location).

Aurora Becomes A Hotel

Another Brisbane apartment building is being turned into a hotel. This time it is Aurora.

Owner residents and tenants are upset and complaining.

http://www.brisbanetimes.com.au/articles/2008/02/01/1201801005451.html

http://www.brisbanetimes.com.au/news/queensland/hotel-boom-will-push-rents-up/2008/01/31/1201714119885.html

http://www.brisbanetimes.com.au/news/queensland/hundreds-face-high-rise-eviction/2008/01/30/1201369225722.html

See prior posts.:

Casino Towers Falls to Oaks

Charlotte Towers to Become Hotel

Turning Apartments into Hotels

When will the Council stop this?

A number of buildings are adding anti-Oaks provisions to their by-laws. The latest to do this is Admiralty 2.

Casino Tower Falls

Oaks has taken over the management of Casino Towers (another Devine building) and has the aim of turning this into a short term accommodation building.

Casino Towers has many apartments with good views over the river to South Bank. But it has its share of problems, even before Oaks gets involved. It faces West. Once it was advertised as having "never to to built out views", owners are now concerned that a large building is planned for right in front on the river as part of the North Bank project. And many of the apartments are poorly laid out, with small window or windows in a room facing the wrong direction.

Oaks is taking over the bottom end buildings in Brisbane:

QUEENSLAND
Oaks Aspire - Ipswich (Opening Soon)
Oaks Lexicon - Brisbane CBD
Oaks 212 Margaret - Brisbane CBD
Oaks Felix - Brisbane CBD
Oaks Festival Towers - Brisbane CBD
Oaks North Quay - Brisbane CBD
Oaks Seaforth Resort - Sunshine Coast
Oaks Calypso Plaza Resort - Coolangatta
Oaks Anchorage - Townsville
Oaks City Quays - Cairns
Oaks Piermonde - Cairns
Oaks Lagoons - Port Douglas

And many occupiers are complaining:

http://cityboard.com.au/viewtopic.php?t=436

http://cityboard.com.au/viewtopic.php?t=272

Brisbane Apartment Sales

Koko (a Stockland development)
Apartment 238 - Greenwich Building - 2 bed 2 bath pool view - sold at auction on 1 December 2007 for $553,000

Arbour On Grey (a Mirvac development)
Apartment 1320 = Stage One, 3rd floor, 3 bedrooms - Sold for $1,100,000
Apartment 2214 = Stage Two, 2nd floor, 3 bedrooms - Sold for $962,500
Third floor, 2 bedroom apartment recently sold for more than $700,000

1901/132 Alice St, Brisbane - $850,000 (Quay West)
206/132 Alice St, Brisbane - $750,000 (Quay West)

Others:

112/293 North Quay, Brisbane - $215,000 (North Quay)

1009/128 Charlotte St, Brisbane - $370,000 (Charlotte Towers)

245/420 Queen St, Brisbane - $477,000 (Aurora Tower)

4020/255 Ann St, Brisbane - $293,000 (Rendezvous)

705/35 Astor Terrace, Spring Hill - $425,000 (The Astor)

3001/255 Ann St, Brisbane - $310,000 (Rendezvous Hotel)

2006/108 Albert St, Brisbane - $305,000 (Festival Towers)

3003/108 Albert St, Brisbane - $435,000 (Festival Towers)

3008/128 Charlotte St, Brisbane - $571,500 (Charlotte Towers)

2101/92 Quay St, Brisbane - $395,000 (Vue)

Recent Apartment Sales in Brisbane

Auctions:

• Festival Towers, Apartment 3109 - did not sell at auction - highest bidder $440,000
• Charlotte Towers, Apartment 507 - did not sell at auction - highest bidder $330,000
• Saville SouthBank, Apartment 1307 - sold prior to auction for $1,400,000

Sales:

• 99/204 Alice Street, Brisbane - $480,000 (The Gardens)
• 901/108 Albert Street, Brisbane - $407,000 (Festival Towers)
• 655/420 Queen St, Brisbane - $1,050,000 (Aurora)
• 651/420 Queen Street, Brisbane - $1,135,000 (Aurora)
• 1001/255 Ann Street, Brisbane - $290,000 (Rendezvous Hotel)
• 2004/21 Mary Street, Brisbane - $500,000 (Metro 21)
• 1004/35 Astor Terrace, Brisbane - $315,000 (The Astor)
• 5304/226 Margaret Street, Brisbane - $3,740,000 (Vision - off the plan sale)

There are plenty of listings in Festival Towers and Charlotte Towers. (For example, Margaret Waters has a corner apartment listed on level 26 (apartment 2601) for $475,000. And see other posts below.) This doesn't help the price in these two Devine buildings, as there is always competition between vendors.

Recent Apartment Auction Results and Apartments for Sale

These are auction results from the Ray White auction rooms, for a series of auctions taking place on Friday 21 September 2007.

• Charlotte Towers - Apartment 4405 - Level 44 - 2 bedrooms, 2 cars, facing North West - $610,000
  
• Aurora - Apartment 331 - Level 33 - 2 bedroom - 107sqm - 1 car - $620,000
• Aurora - Apartment 509 - Level 50 - 2 bedroom - $515,000
• Festival Towers - 2 bedroom - $495,000

Ray White has these apartments el cheapo apartments listed for sale (as at early October 2007) in Festival Towers,

108 Albert Street

:

• Festival Towers - Apt 604 - 1 bed, 53 sqm internal, H type with no view - very small balcony (3 sqm) no car park - $295,000
• Festival Towers - Apt 1405 - 1 bed, 53 sqm internal, I type with no view - very small balcony (3 sqm) no car park - $300,000
• Festival Towers - Apt 901 - 2 bed, 2 bath, 75 sqm internal - E type on corner - very small balcony (3 sqm) - $417,000
• Festival Towers - Apt 1311 - 1 bed, 54 sqm internal, M type with no view - very small balcony (4 sqm) no car park - $315,000
• Festival Towers - Apt 1401 - 2 bed, 2 bath, 75 sqm internal - E type on corner - very small balcony (3 sqm) - $435,000
• Festival Towers - Apt 1408- 2 bed, 2 bath, 83 sqm internal - D1 type - looking into back of M on Mary, very small balcony (3 sqm)- $415,000
• Festival Towers - Apt 3601 - 2 bed, 2 bath, 75 sqm internal - N type on corner - balcony that can be closed in (10 sqm) - $515,000
• Festival Towers - Apt 3702- 2 bed, 2 bath, 87 sqm including balcony - O type, one of the better plans - looking into Charlotte Street, however view of river to West will be lost when Westin Hotel is built on Elizabeth Street, small balcony (5 sqm)- overpriced at $525,000
• Festival Towers - Apt 3902- 2 bed, 2 bath, 87 sqm including balcony - O type, one of the better plans - looking into Charlotte Street, however view of river to West will be lost when Westin Hotel is built on Elizabeth Street, small balcony (5 sqm)- very overpriced at $555,000
• Festival Towers - Apt 2502- 2 bed, 2 bath, 87 sqm including balcony - O type, one of the better plans - looking into Charlotte Street, small balcony (5 sqm)- auction at end of October

Festival Towers

I recently visited two apartments in Festival Towers, a Devine development in Albert Street in Brisbane.

Recently, the management rights were sold to the Oaks Group.

The complex is very lively. The common rooms and bbq areas at about 5pm were packed. Mostly foreign students.

The apartments on the South East side (e.g., S, T and U types) have now had their views blocked by M on Mary, a building designed mostly for students. A big loss of privacy for this side of Festival Towers.

The apartments on the North West side (e.g., P and O types) now have a river view in a Western direction, towards South Bank and Milton. That view will be lost when the new Westin Hotel building, Empire Square, is constructed on Elizabeth Street.

Two bedroom apartments in Festival Towers are selling in the $400,000s. They range in size from 85 sqm to much smaller, e.g., less than 75 sqm.

Will You Have Hotel Guests Staying In Your Building?

A number of Brisbane apartment buildings are being slowly turned into hotels by the Oaks Group, who have purchased management rights for the buildings.

If you are thinking of buying an apartment to live in, or renting an apartment for six months or more, you should take care not to buy or rent in apartment buildings that are or will soon become short term stay accommodation. The reason - the other "residents" of the building may only be staying for one or two nights -- there have been complaints about noise, parties, security issues, overuse of facilities such as pools, rubbish left in halls, and parking in the wrong spaces.

The apartments in such buildings will not, in my view, have good capital gains, as they will be less desirable for owner-occupiers and will become run down over time.

You should take extreme care before buying or renting in the following buildings:

• Festival Towers
• Felix
• Charlotte Towers
• 212 Margaret Street
• River City
• Any building managed by the Oaks Group
• Any building built by Devine
• Any building where the management rights are controlled by a real estate agent named Marshall.

(I see that a 2 bedroom apartment in Festival Towers, on level 31, recently was sold at auction by Ray White for $410,000. Another one on level 39 was unsold with the highest bid less than $450,000. It is now listed for sale at $499,000. Other apartments in the same building that are not as good as listed for sale in the high $400K and above $500,000 -- TAKE CARE!)

Here is a recent press report:

Oaks Hotels & Resorts has ramped up its growing domination of the Brisbane CBD accommodation market after snaring the management letting rights (MLRs) to two premier high-rise apartment towers, the 41 level Festival Towers and the 39 level River City project, for $14.1 million.

Today’s announced deal for the two properties delivers an additional 532 apartments to the rapidly expanding Oaks stable.

Managing director Brett Pointon says the latest acquisitions will boost Oaks Brisbane CBD portfolio to seven high-rise apartment buildings including Oaks 212 Margaret Street, Oaks Lexicon Apartments, Oaks North Quay, Oaks on Felix and Charlotte Towers (Oaks to take over management in October 2007).

While the 532 apartments delivered under the latest acquisition will initially be included in Oaks permanent letting pool, the company expects to progressively convert a majority into its short-term serviced letting pool to compete in Brisbane’s burgeoning short-stay market.

There is also a further 89 apartments in the buildings that are owner occupied or managed by external agents.

Pointon says Oaks expects to swell its short-term room stable from the 3,489 to over 3,600 serviced apartments by the end of June 2007.

In addition to the MLRs to the two properties, Oaks also acquired the freehold to the manager’s apartments in both properties for $1.45 million.

He adds the two latest acquisitions and the commissioning of Charlotte Towers deliver Oaks an unrivalled position in the increasingly buoyant Brisbane CBD accommodation market, and deliver a pipeline of units to further swell its serviced letting pool over the next two to three years.

"We’re expecting the market to continue tightening given the lack of any mooted major new hotels or serviced apartment projects in the CBD for the foreseeable future, with the exception of Charlotte Towers, which we’ve already secured the MLR for," he says.

"With Brisbane now boasting the highest hotel occupancy rate in Australia at around 80 percent, this strengthened presence in the local market will prove a cornerstone of Oaks financial performance over the next several years."