Devine Makes a Killing at Hamilton Harbour

"Devine reported the sales success at Hamilton Harbour as one of the highlights of its financial year as it reported an underlying profit after tax of $11.1 million but a statutory after tax loss of $12.9 million.

Devine says 90% of total apartments in the two Hamilton Harbour towers have now been settled.  Construction of both towers is now complete with a third tower now under construction.  There are 13 apartments available for purchase in tower one and 31 available in tower two.

Devine says the inner-Brisbane market, the focus of more than 40 apartment projects by a variety of developers, is now stable after a “prolonged period of weakness” with successive quarters of good volume sales.

The Hamilton Harbour precinct located between Racecourse Road and the Brisbane River in Hamilton is a joint venture between Devine and Leighton Properties with one-bedroom apartments starting at $425,000.  Devine says price is continuing to drive the majority of sales with 70% of unconditional sales under $550,000.

Devine expects Tower three settlements to commence prior to December 2012 and contribute to current year earnings with almost 70% of this tower contracted."

Extract from Property Observer article

Brisbane Airport Proposed Second Runway

What impact will the proposed changes to the Brisbane air traffic patterns have on apartment values in Hamilton?

Portside and Hamilton Harbour

This photo shows how crowded this area of Hamilton will soon become with apartment developments.

Site A has development approval for 87 serviced apartments.  Site B has DA for 127 residential apartments.

Hamilton Harbour Press Release

HUNDREDS of new sales and settlements of residential apartments at the Hamilton Harbour mixed use development are signaling renewed confidence in Brisbane’s property market, according to developers Leighton Properties and Devine Limited.

During the November-January period, over 380 pre-sold apartments settled in the 22-level Harbour One and 19-level Harbour Two towers, completed in November 2011.  This now brings total settlements to more than 90 per cent of the 434 pre-sold apartments.

Project director John Campbell said, “Predominantly local buyers have been the driving force behind these sales and the average price of settled apartments is $526,000.  Pre-sales accounted for over 90 per cent of apartments in the two towers, a Brisbane record for the post-GFC environment.”

The 20-level third and last residential tower Riverside Hamilton, currently under construction and due for completion in late 2012, had sold 128 apartments (113 on unconditional contracts) by the end of January.

With Harbour One and Harbour Two owner occupiers moving in, and over 75% of investor purchased properties already rented, the first two towers are quickly filling up with residents.

“The average gross rental yield on one-year leases is 5.3 per cent across all stock, with one-bedroom and two-bedroom with study products achieving higher yields,” Mr Campbell said.  “Professional workers, couples and fly-in fly-out workers are boosting popularity of the leases on offer, with rents starting at $300 per week.

Mr Campbell said residents were also eagerly awaiting the opening of Hamilton Harbour’s commercial and retail precinct which would bring restaurants, convenience and boutique shopping right to their doorstep.

Positive Signs For Brisbane Property Market

Matusik has written a note "Seven positive signs for Australia's property market".   A focus of the note is the Brisbane apartment market.  Contrary to the blog entry below, Matusik believes that Hamilton Harbour is settling well.

Failed Settlements At Hamilton Harbour

Devine reports that as at 8 February, 384 settlements had occurred for the apartments in Towers 1 and 2 at Hamilton Harbour.

Devine also reported to the ASX this week the following information:

• Hamilton Harbour (Towers One &Two) settlements commenced with 85% of contracted pre-sales settled prior to 31 December 2011 
• This strong completion result is testimony to the quality outcome at Hamilton Harbour
• Sales activity within the third residential tower has improved and continues into 2012.

I think it is somewhat funny that Devine thinks that a settlement rate of 85% is a strong result.  Maybe there were expecting a lot worse.  There are 469 apartments in total in Towers One & Two.  So assuming that all have sold, this means that 70 buyers did not settle.  That is a large number of contracts to crash.

Why buy in the third tower, when you have a choice of 70 failed contracts in the first and second towers?

Devine Hamilton Harbour Settlements

Devine recently issued a stock market release saying:

"Market conditions have continued to deteriorate across most Australian property markets which have had a significant impact on the company bringing new projects to the market."

In Brisbane, Devine has a joint venture with Leightons on a multi-building apartment complex called Hamilton Harbour, where most off-the-plan sales for buildings one and two have reached settlement.

According to the AFR this week, as at late December, Devine had settled 80% of the off-the-plan sales.  Why have 20% not settled?  All may be revealed when Devine's financial results are released shortly.  If 20% of the sales have fallen over, this may impact nearby developments by Brookfield Multiplex, Mirvac and Citimark.

Devine has a rental website for the project, advertising two bedroom apartments for rent from $545 per week.  But some two bedroom apartments are listed on RealEstate.com.au for $795 a week, which seems outrageously high for a 85 sqm apartment facing West.

Hamilton One (also called Harbour One)

Here is a comment sent to me by a reader:

Recently, I arranged an inspection of apartments for sale in Hamilton One.  I am in the market so the request for an inspection was 100% genuine. 
The complex was only just finished. The thing that turned me straight off permanently in my particular situation, was that all the one bedroom apts do not have an oven to cook with and there is no provision for one, just a two-burner gas top. They have put in a movable bench-top convection microwave. It would be impossible to put a small gas BBQ on the balcony because the balcony’s are essentially closed in albeit for the concertina sliding windows which are up at about eye level upwards so the gas BBQ would essentially be inside, a VERY BIG no-no.  Of course, horses for courses and some people don’t cook, (I suppose??) so they may see that as a plus. Micro-waved and wok-cooked food does not appeal to me personally. 
While prices are advertised at $300,000 for one bedroom, that’s with a view of other high rise buildings, and no car park. I guess if you don’t have a car that’s fine, why pay for one if you don’t need or want it? I personally could not do without one. Therefore for me with a car, I think from memory (check for yourself) that one needed about a $415,000 start to have a car park however, that did include a reasonable view (in my opinion) since the one brm apts with car parks are on higher floors than those one brm apts without a car park. 
The concertina windows when open did seem to provide good ventilation and individually controlled ducted air con is throughout. The apt’s did have plenty of natural light which I thought was good, though another seven story complex is now under construction on the Nth side so that may impact on light, maybe not. 
Comms are Optus only. I personally did not like that “no-choice” option. According to the agent, hot water is individually metered from a central (gas??) boiler that distributes hot water around the complex and water is individually metered. I’m not sure how one went about getting electricity. I wonder what the unit rate for those utilities is? Foxtel is wired in, buy it yourself if you want it. 
The sales agent while quite pleasant seemed otherwise busy so other than a couple of apartment configurations, I was not shown around the complex to see the pool and any other facilities that may be there. I saw one pool though I think there may be two???

Northshore Hamilton

The $5 billion Northshore Hamilton urban redevelopment is underway, with thousands of apartments expected to be built in the next 10 years.  About 15,000 new residents are expected to move into this area, which is an old port and industrial precinct 6 km down river from Brisbane City.

• Two Devine apartment buildings are almost complete, with a third on the way.
• Brookfield Multiplex is building another Portside apartment building, Promenade (172 apartment), with two more planned.
• Citimark has development approval for Rivana, 15 levels with 208 apartments.
• Mirvac has a three building apartment complex planned, with a sales display office constructed onsite.
• Australand has launched 78 apartments as part of its $400 million project, Hamilton Reach.

Will there be an oversupply of small, non-riverfront apartments in this part of Hamilton, where there are few facilities and not much within walking distance?

Devine's Hamilton Harbour

Hamilton Harbour is a three building apartment complex (plus one additional building of commercial space) currently being developed by Devine.  Two of the three buildings are almost complete.

According to Place Real Estate Agents, across the three buildings there are 658 apartments.  There are 125 apartments remaining for sale (mostly in the third building).  In the September 2011 quarter, 14 apartments sold (about one a week).  At this rate, it will take 26 months to sell the remaining apartments.

One beds are listed for rent from $300 a week, two beds from $510 a week, and three beds from $850 a week.

Here are some recent photographs, taken from the Portside area, of the two finished buildings.

Devine's Hamilton Harbour

Devine reports to the Australian Stock Exchange, as at 25 August 2011, the following in relation to its Hamilton Harbour apartment development:

"Continued strong sales performance

• HarbourOne - 98%sold ($137 million in value)

• HarbourTwo - 86% sold ($92 million in value)

• Riverside - 60% sold ($57 million in value)

Construction on schedule for all three towers:

• TowerOne 78% complete

• TowerTwo 63% complete

• TowerThree commenced

Significant progress on mixed-use elements of Hamilton Harbour with strong retail and commercial leasing underway

Construction on Hamilton Harbour is ahead of schedule and under budget with completion of first two towers in first half of FY12

• Hamilton Harbour TowersOne and Two are both ‘topped out’, with fit-out complete on over 60% of apartments

• Construction delivered revenue of $108 million

• Devine Construction awarded $60 million contract to build ‘Riverside’ – the third tower at Hamilton Harbour."

So, Riverside is costing $60 million to build (including profit for the builder); and 60% sold gives $57 million in sales. Looks like a good profit margin here for Devine.

Hamilton Harbour Tops Out

It looks like two of the Hamilton Harbour apartment buildings by Devine have reached full height. A photo above from Kingsford Smith Drive of two of the towers, with the Brett's Wharf buildings to the right.

Will Hamilton Harbour Buyers Settle?

"Hamilton Harbour’s settlement rate should be on the development industry’s “must watch list”. Hamilton Harbour is a litmus test for the Brisbane apartment market – a beachhead, if you will."

All investors in Brisbane apartments should read this note by Matusik.

Hamilton Harbour

Update from Devine:

"Construction at Hamilton Harbour is progressing on schedule; the rise of Brisbane’s newest lifestyle Mecca will be completed by Christmas 2011. With the first tower, Harbour One, already beyond level 20 and internal fit out is occurring from level 1 to 17; and Harbour Two now at level 11 with the internal fit out occurring from level 1 to level 8, excitement is definitely building as the project becomes a reality."

"With construction well under way, the first two residential apartment towers of Hamilton Harbour are on schedule to be completed prior to Christmas 2011.

Riverside Hamilton, the third and final residential stage in prestigious Hamilton, is selling fast and due to commence construction later this year with completion in 2013."

Hamilton Harbour is located on the busy Kingsford Smith Drive, and is not riverfront, but one block back from the river.

A tiny 61 sqm internal two bedroom apartment with views to the airport and not the river is available from $533,000 on level 15, or $485,000 on level 2.

Reminds me of the article about the shrinking apartment size. Clearly, this building is aimed at investors and not residents.

Developments at Portside

The photo shows development sites by Devine, Citimark, Mirvac and Brookfield Multiplex. (Double click on photo for larger view.) An endless supply of apartments, which means values are unlikely to rise significantly.

Devine Half Year Results

Extracts from presentation to investors:

• Strong market response to Hamilton Harbour project with third tower sales progressing well
• Hamilton Harbour (Towers One & Two) construction advancing well, with construction of third tower targeted for mid-2011 commencement
• Hamilton Harbour has continued to attract strong sales and enquiry with: - 92% of apartments in the first two stages at unconditional contract status, and 49% of Stage 3 now sold and unconditional
• Hamilton Harbour Tower One is progressing well with structural cycles completing verticals up to floor 14 and slabs up to floor 12
• Tower Two is close to entering structural cycles which will see the structure advance noticeably from this point in the coming months
• First apartments expected to be completed by December 2011

• New opportunity secured; 107 apartment project in Teneriffe, Brisbane CBD fringe (Commercial Road - 107 apartments (1 and 2 bedroom only), marketing to commence in second half of 2011)
• New project signals Devine’s ability to apply high density residential capabilities to mid-scale, medium density opportunities

Devine Hamilton

The Australian Financial Review included an advertisement last week stating that Devine had received construction finance for Hamilton Harbour.

Devine has also started to market a new building on the same site, Riverside Hamilton.

No Finance Yet for Hamilton Harbour

Devine still has not obtained finance for its Hamilton Harbour development. The AFR reports that it could take up to two months of further negotiations for Devine to obtain finance. The average price of all apartments sold in this development to 31 December 2009 is just less than $520,000 per apartment. For the first tower, the average price is $539,000 per apartment.

From a report to shareholders this week:

"The company’s mixed-use Hamilton Harbour joint venture with Leighton Properties also continues to progress well with over 90% of the first stage being sold by 31 December 2009 with 233 apartments representing $125.6 million in sales.

Following the success of the first stage, the second stage residential tower was released to the market in October 2009 and this has resulted in total sales to date for the two stages of 377 apartments worth $196.6 million with 317 of these sales unconditional with 10% deposit paid. Devine together with its joint venture partner, Leighton Properties, continue to progress securing funding for the construction phase and are confident that this will be achieved."

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.

Hamilton Harbour Update

"Strong pre-sales of residential units in Hamilton Harbour stage 1 with 89% of 257 units now sold. (This project is also a JV with Leighton Properties) ... Hamilton Harbour and King George Central forecast to commence later this calendar year subject to finance being secured."

Devine Annoucement

"SALES LEVELS ACHIEVED ON STAGE 1 OF THE HAMILTON HARBOUR MIXED-USE RESIDENTIAL, COMMERCIAL AND RETAIL DEVELOPMENT HAVE EXCEEDED OUR EARLIER EXPECTATIONS. ... TOGETHER WITH LEIGHTON PROPERTIES WE HAVE NOW COMMENCED THE PROCESS OF SECURING FUNDING FOR THE CONSTRUCTION PHASE AND, GIVEN THE HIGH LEVEL OF PRESALES ACHIEVED, ARE CONFIDENT OF ACHIEVING THIS TO ALLOW CONSTRUCTION TO COMMENCE SHORTLY."

AGM Speech