The Oracle - Big Losses

INVESTORS who bought into the $850 million Oracle Broadbeach development on the Gold Coast have taken losses of up to $1m.

Receivers of the company behind the failed project are vowing to pursue legal action over the unsettled 200-odd apartments in the two-tower complex, once promoted by author and former model Tara Moss.

One Oracle apartment owner said he was aware of people who had settled on apartments located on the 44th floor for $3.5m and had since sold them for $2.5m.

Michael Kuhne said his late wife bought one of the three-bedroom Broadbeach apartments off the plan for $2.4m, and it was yet to settle.

He tried to sell the property last year, but there were no buyers. "I am trying to get rid of it and can't," he said.

KordaMentha announced on Thursday night that South Sky Investments, the Niecon-related company behind the Oracle, had been placed into voluntary receivership by director Michael Nikiforides. The Broadbeach project was highly leveraged with several financiers, including the National Australia Bank, sources said.

Queensland property analyst Bill Morris said the number of new high-rise apartments for sale on the Gold Coast had almost halved to about 750 in the past year, and the volume of sales for the three months to November was the lowest level since 1981.

"Things improved for a while, but the Gold Coast in particular has died. There is a general expectation in the market that prices could still fall," he said.

The two 40- and 50-storey Oracle towers have 505 apartments, a five-star hotel, shops and commercial office space and are among the tallest on the Gold Coast.

It is the second Niecon-related venture to fail this month after the company linked to the Nirvana By The Sea residential Gold Coast project, Kirra Beachfront Investments, was handed over to its financier.

Attention is turning to other luxury apartment towers on the Gold Coast, such as Juniper's Soul, a Surfers Paradise luxury apartment project, which settles at the end of next year, and the Hilton Surfers Paradise Hotel & Residences, which is also settling next year.

Source: The Australian

2010 Brisbane Apartment Awards

These are our awards for 2010:

1. Wildest Advertising Claim

FKP Properties wins this for their overpriced The Milton development. Their sales agents are giving out printed information to potential investors about future property values. They have a sheet of paper showing investment returns for a 2 bed, 1 bath apartment listed at $650,000. The prediction is that this apartment will be worth $807,500 on completion of the project in 2013, and will be worth over $1M by 2016. The predicted rent is over $720 a week in 2013.

2. Worst Investment

This is a hard one. Many investors who purchased off-the-plan in 2006 or 2007 had to settle this year. Some were unable to get bank valuations anywhere near settlement. The contenders for this category are:

• Mirvac's Tennyson Reach
• Niecon's The Oracle at Broadbeach
• Raptis' The Hilton Surfers Paradise
• Evolution.

I think they are all bad investments, so maybe a four way tie!

3. Biggest Delayed Development

Again, a number of contenders for this category. There are many big developments that have been delayed indefinitely -- Trilogy, Evolution, Empire Square, FKP's Albion Mill. South Point is another contender here -- although it looks about to finally begin.

But the winner is El Dorado at Indooroopilly. Construction has been about to start for years now. What is going on at this development?

The Oracle Goes Bust

Not unexpected - The Oracle tower's developer at Broadbeach went bust this week. It seems that the bank valuations for the off-the-plan sales were way less than the contract price, and so many apartments did not settle because the purchaser could not get finance. It seems that the banks were putting pressure on the developer to settle at lower prices. A downward spiral.

See Gold Coast Bulletin.

Trying to Get Out of an Off-the-plan Contract

Here is a decision regarding an investor trying to get out of two off-the-plan contracts for apartments in The Oracle at Broadbeach. The judge decided that the case will have to go to trial. As purchasers at Tennyson Reach have found out, it is not easy to get out of off-the-plan contracts.

See South Sky Investments Pty Ltd v Prins & Anor [2010] QSC 438 (22/11/2010)

Gold Coast Collapsing

Story from the AFR on Friday last week - "Banks judge Gold Coast apartments as vulnerable".

"Westpac Banking Corp has a particularly cautious view, especially of luxury properties worth more than $3M on the Gold Coast, which is described as a key area for 'additional risk management focus'. There are hundreds of apartments on the Gold Coast priced at more than $3M. At the Oracle development at Broadbeach, there are at least 50; at two other projects coming to completion - Juniper's Soul and Brookfield's Hilton - there are more than 100."

Story from The Australian today: "Gold Coast High Rise Stress Underestimated"

"MAJOR bank Suncorp estimates that less than 10 per cent of buyers are defaulting on several major apartment projects on the Gold Coast.

Gold Coast property agents have claimed the estimate was extremely optimistic. ...

"They'll be celebrating in the streets if it's only 10 per cent default," one Gold Coast agent said.

"There's a lot of rumours around about settlements, but it's all looking very slow."

Soul has been on the market for five years and, while the market boomed for the first three of those years, the global financial crisis cut the value of these units substantially."

Gold Coast

Although this blog focuses on Brisbane, a number of Brisbane investors also purchase on the Gold Coast. As the Brisbane market is flat, such investors are less likely to purchase on the Gold Coast at present. There are three big developments completing in the next year. First will be The Oracle at Broadbeach, then Hilton at Surfers Paradise, and then Soul. All are completing in two stages.

Here is a nice video showing The Oracle at Broadbeach. (Click here for full size video.)

Here is a link to photos showing Soul and the Hilton project, courtsey of defec8R of SkyscraperCity.

Close Up

Wide view

Gold Coast Oversupplied

Coast High Rise Demand Dries Up

The situation on the Gold Coast is not good. I wonder if everyone will be able to settle new apartment purchases in Soul and Oracle this year, when valuations are likely to come in under contract price. Note that Juniper's last project is SE Qld, Oceans, there have been no resales of apartments for more than the initial off-the-plan contract price -- with some owners selling at $200,000 or more loss. From the Gold Coast Bulletin:

"THE Gold Coast's high-rise market is at a standstill, with only 57 new apartments sold in the May quarter, the quarterly Midwood Report has revealed.This takes the total number of units sold since December last year to 115, the report shows.

Units in the city's biggest projects -- Oracle, Soul and Hilton -- are due to settle later this year. Settlement will depend on valuations, available finance and the circumstances of the owners.

Bill Morris, author of the report, said settlement of these projects would be the 'litmus test' for the market, with many buyers handing over deposits before the onset of the financial crisis, when unit values remained strong. He also said there was enough available stock for five years."

See also

http://www.goldcoast.com.au/article/2010/06/11/227041_gold-coast-real-estate.html