Regulations relaxed for Tennyson Reach - then Floods

Real estate agent David Dunworth told the Queensland Floods Commission of Inquiry he bought a luxury unit at the Tennyson Reach complex, which adjoins the State Tennis Centre at Tennyson on Brisbane's south-side, without doing a flood search on the property.

The unit, along with another one in the complex he was leasing, was inundated during the Brisbane floods in January this year.

After the flood, which caused major damage to his unit and destroyed furniture, art and other belongings, Mr Dunworth said he discovered his unit was more than two metres below the 1974 flood level. He also discovered regulations that required the property to be set back 20 metres had been relaxed to allow his unit complex to be built just six metres from the river.

"I think if I had known all these things we would have considered making a different decision," he said.

He said sellers should be required to provide the information up front. Mr Dunworth said he believed that since a major property developer, Mirvac, was behind the project and it had the backing of the state government and planning approval from the Brisbane City Council, all necessary precautions would have been taken.

"I just assumed that the most stringent conditions were being imposed," he told the inquiry.
Source: SMH

The values at Tennyson Reach have dropped by 30% to 50%.

Tennyson Reach Contract Cancelled Due to Flood

Mirvac lost a legal battle in the Queensland Court of Appeal this week, in relation to an apartment at Tennyson Reach that flooded in January. Mirvac had two senior counsel to argue this appeal - it flew up Alan Myers QC from Melbourne and also used a local Senior Counsel -- both very expensive barristers. But that did not assist. The buyer was allowed out of the contract. See Judgment and The Australian.

Tennyson Reach Write Down

"LEADING property developer Mirvac Group has written down the value of a flood-damaged development, Tennyson Reach in Brisbane, by $80.8 million.

The latest writedown, which the company previously foreshadowed, brings the total in the group's residential land assets to $295m this year.

Mirvac said that since the January floods, the Tennyson residential market had limited transactions and pricing had been affected by uncertainties created by the pending results of the Queensland flood inquiries.

The group revalued the carrying value of Tennyson Reach, including 43 unsold apartments and the remaining undeveloped land.

"This has led to a provision of $80.8m, resulting in zero value as at May 31, 2011," the company said in an ASX announcement."

The Australian

See also Courier Mail

This is not a surprise. This development was not in a great location, and there are very few facilities for residents in the area. The development had bombed well prior to the flood -- the flood was the last blow for a dog of a project.

Mirvac Abandons Tennyson Reach

Mirvac was developing Tennyson Reach, and aimed to have six apartment buildings along the river. Three have been built. They flooded. The apartments have dropped significantly in value (even prior to the floods). Three more apartment buildings were planned. Mirvac has now abandoned Tennyson Reach as a bad dream. No more apartments are to be built. I guess this means that the current owners should be happy that there will be less competition from future development. But it also shows that Mirvac thinks there will be no demand for further apartments in this out-of-the-way location that has few amenities.

Tennyson Prices

It is interesting to see the current pricing for apartments being resold at Tennyson Reach. This is a Mirvac development in the middle of nowhere, and three more buildings are planned.

This complex was badly impacted by the floods. The Mirvac website says:

"Thank you for your enquiry through the Tennyson Reach website. Mirvac does not have any apartments for sale at Tennyson Reach but anticipates that apartments will be made available in the near future. "

They have put their sales program on hold -- they still have many unsold apartments in building three.

Currently, you can buy a prestige riverfront 3 bedroom apartment for $998,000, on the 6th floor. This is about $600,000 less than the original sales price. Beware, body corporate levies are high. The original purchaser would have lost a significant sum of money on this apartment. No guarantee that the next purchaser will not loose too.

Tennyson Reach - Legal Decisions

Mirvac and about 15 buyers have gone to court regarding Tennyson Reach, in a number of cases. For the most part, Mirvac has been successful in enforcing off-the-plan contracts against buyers. Here are some extracts from some of the decisions.

"As already noted, Mr Cox values the apartment at $1,500,000 and said that its value would have been $1,750,000 had the view been the equivalent of that from the display centre. " Mirvac v. Holland

"The defendant [Mirvac] is in possession of the apartment. After the flood, it removed the mud. The walls of the apartment consisted of Gyprock sheeting. The defendant removed the lower level of the Gyprock, which was flood affected. Wiring was disconnected; switches were removed and piled into a heap; appliances were disconnected. Dunworth v. Mirvac

"It is that the area of a part of the actual Lot varies by more than five per cent from the area depicted upon the drawing for that part. In this case the area of each of the balconies varies from what was shown within the original drawing by, in one case, 10.35 per cent and in the other by 15.30 per cent. Because clause 6.3(a) of the proposed (and actual) contract permitted a change up to five per cent to the “size of the Lot or any part of the Lot” it is argued that these changes made the actual Lot different from the proposed Lot as originally identified." Mirvac v. Beioley

Tennyson Reach Flooded

Extracts from Story from The Australian:

"Yesterday, as the smell in the luxury dwellings at Tennyson Reach, home to tennis greats including Ashley Cooper, rose with the temperature and humidity, owners wondered how the planning controls that were meant to regulate development could have gone so wrong.

Several said they were assured before buying that the ground level would not flood unless the Brisbane River reached a mark of 8.4m, well above the 4.46m at which it peaked last Thursday after a massive discharge of 645,000 megalitres from Wivenhoe Dam on Tuesday.

Between cleaning up and moving out yesterday, several owners said they needed explanations from Mirvac and the council about their true flood immunity and whether the development, completed less than two years ago, should have been approved, given its history of inundation.

The flooding at Tennyson Reach is one small part of a major problem for Brisbane City Council and the Queensland government, as the losses of owners, the liability of developers, and the policies of governments combine in a perfect storm of recrimination and confusion. The residential precinct went through all the council's usual approvals process after the Beattie government sought tenders to make something glorious from the site of the abandoned and obsolete power station.

Apartment owner Chrissie Buchanan, who bought in June 2009 with her husband, Sam, who is a quadriplegic, has had damaged floors, walls and cabinets. She said she was fortunate to have insurance and was in a lot better position than many in Brisbane.

"The things that have been damaged are easily replaced," Ms Buchanan said. "There are people who have lost their businesses and houses. I feel for people who are a lot worse off than ourselves."

She said flooding risk was "not an issue" that was canvassed when she and her husband bought the property. "You never believe it's going to happen to you," she said.

Keith George, who paid $2.25 million for his ground-floor apartment 18 months ago, said he had waist-level water throughout his property. As a result, he will have to rip up floors and carpets, rebuild walls, and most of the apartment's cabinets will have to be replaced. "I'm going to have to spend at least $100,000 to replace the cabinetry," he said. "We won't be back in here for months."

Mr George said the flood risk never came up when he was buying the property, partly because City Hall had approved the development.

"And I always believed the Wivenhoe would not let the Brisbane River come up," he said.

Another resident, Julie Savage, said most people living in the complex were not too concerned on Tuesday night when other parts of the city started to evacuate their homes.

"I got the impression everyone was relaxed because it could withstand a flood of 8.4m, so it would all be fine," she said.

It is not only residents on the ground floor who are affected, with those on the many levels above unable to return home because there is no power and no lifts working. "They were saying 12 weeks until they can return, but it might be eight," Mr George said.

...

Mirvac Development Queensland chief executive Matthew Wallace, who inspected the development yesterday, said the priority was to work with the body corporate to get the buildings reinstated, and "get peoples' lives and properties back together".

The flooding hit the apartments 12 hours before the peak in Brisbane of 4.46m. It is believed the body corporate does not have flood insurance.

Several owners who bought their apartments before the global financial crisis had looked for loopholes to litigate a way out of their contracts before settlement, but failed after filing actions in the District Court. The irony is that being misled over the level of their flood immunity might have provided a perfect exit.

After successfully defending itself against some residents' claims that it misrepresented the quality of the river views, as well as a host of technical legal arguments surrounding the contract documents, Mirvac said the original buyers had to meet, in some cases, hundreds of thousands of dollars in default interest and associated costs."

Mirvac Group said its Waterfront Newstead development had experienced some basement flooding, while its Tennyson Reach building had basement and ground floor inundation.

Mirvac added that the Brisbane floods were having a limited impact on its residential projects.

Aerial Photos of Brisbane

Mirvac's Newstead Waterfront project

Mirvac's Tennyson project

Pradella's Water's Edge

Kelvin Grove Urban Village

Chermside

South Bank

(photos taken September 2010)

Buyer Gets Out of Contract with Mirvac at Tennyson

See Wilson v. Mirvac regarding Tennyson Reach

"it is declared that the applicant has validly cancelled, pursuant to s 214(4) of the Body Corporate and Community Management Act1997 (“the BCCMA”), the written contract entitled “Sale Contract Tennyson Reach” dated 4 December 2007 between the applicant and the respondent"

"The apartment was to be the principal place of residence for the applicant, her husband, and two teenage children. It was adjacent to the Queensland Tennis Centre (a major public facility) and a busy public thoroughfare. At the time the applicant’s husband’s occupation was such that the whole family might reasonably have a heightened sense of vulnerability to unlawful attack. The security system had been promoted as an integral feature of the development and arrangements for its management. Viewed objectively, a person in the applicant’s circumstances in August 2009 would be disadvantaged in a substantial way by its omission. That disadvantage was compounded by the omission of other items of property which would have enhanced the amenity of the apartment."

See also Changes to Your Development: When is a Buyer Materially Prejudiced? - Property and Commercial Services Update - May 2010

Talking Up the Top End

"Publicly listed property company Mirvac has also started the decade on a positive note, selling $30 million worth of $1 million-plus apartments around Queensland in the first three months.

Mr Johnston said the exclusive riverfront development at Tennyson Reach had exceeded everyone’s expectations in the current market. "The fact it’s sold so well in a market affected by the GFC is testament to the quality of the product and the prime location," he said.

The Tennyson Reach sales ranged up to $2.845 million for luxury apartments on the riverfront, located close to the new Tennyson Tennis Centre. Mr Johnson said that apart from families with old money, 2010 had seen the return of the investor – and they’re not all mum and dad investors with $600,000 to spend on a three-bed, one-bath inner-city renter.

An increasing number of multi-million dollar sales have been to investors, such as one riverfront apartment Mr Johnston sold for nearly $3 million last month. The investor is planning on renting the apartment out.

Ms Havig said foreign investors and expats were also present in the prestige market.
"They feel that the market is still going to rise considerably and want to get in before it does," she said."

See Brisbane Times for full story.

Tennyson Reach Auction Results

Mirvac auctioned 9 apartments at Tennyson Reach last weekend. There are more than 15 purchasers of off-the-plan apartments at Tennyson Reach who failed to settle. Mirvac auctioned off nine apartments where there was no legal dispute between the Mirvac customer and Mirvac. (S0 there will be more sales of failed settlements coming.) The auctions were all three bedroom apartments with river or mangrove views. For all these apartments, they sold off-the-plan for more than $1M.

At the auction, there was only one apartment where bidding was more than $1M. This was apartment 3311 (a 6th floor end apartment, 234 sqm including balcony.)

For all other apartments, the majority of bids were in the $800K and $900K range. Most of the apartments did not reach the reserve, and were passed in. Some sold after auction, and at least 5 were still for sale when I looked recently. The apartments that did not sell at auction or immediately after were:

www.johnstondixon.com/3111k
www.johnstondixon.com/3103k
www.johnstondixon.com/4117k
www.johnstondixon.com/4212k
www.johnstondixon.com/4215k

Mirvac is being very secretive regarding the results of the auction and the ultimate sales price. In my experience, when the seller and seller's agent do not publicise auction results, this is often because the results were not good. The results were not reported to APM, and so the weekend auction result report for last weekend was even worse than reported for Brisbane.

Tennyson Reach Liquidation Sale!

As previously reported on this blog, a number of off-the-plan purchasers at Mirvac's Tennyson Reach failed to settle, and are being sued by Mirvac. Mirvac is now selling these apartments by auction.

"A very frenetic listing week has culminated with the official listing of nine riverfront apartments (under instructions from Mirvac Queensland where the buyers have not settled). These apartments are to be auctioned in a line on Saturday the 14th November at 12 noon. Our clear instructions are that these quality riverfront apartments WILL BE SOLD.

Elsewhere, buyer activity in the middle and upper ends of the market continues to increase as we move into one of the busiest sales times of the year.

Warm Regards,
Dianne Bauer
Associate
JOHNSTON DIXON

Tennyson Reach Auctions

Two apartments went to auction today at Mirvac's Tennyson Reach. Both were 3 bedroom, 2 bathroom apartment on level 3. They have river and mangrove views.
See Apt 4108 listing and Apt 3205 listing.
For both apartments, there were no bids. Passed in.
This does not bode well for Tennyson Reach. So far, there have been no resales, even though there are about 30 apartments listed for resale. In addition, from what I can determine, between 15 and 20 apartments failed to settle.
When compared with similar quality apartments located in inner city areas, I would say these apartments are worth less than a million, but I am not a valuer. I suspect that the owners (who paid more than $1.3M) will take a bath if they sell.
A warning against buying of the plan during a boom.

Poor returns at Mirvac's Tennyson Reach

I pity the investors who purchased an apartment at Mirvac's Tennyson Reach. The returns are terrible. The quality and size of the apartments are great. There are magnificent river views from most apartments. But the location is pretty terrible. There is no neigbourhood. The tennis centre is very industrial.

As previously reported, Mirvac has sued at least 10 purchasers who did not settle. Valuations for some apartments came in $200,000 or more under contract price. It will be hard for an original buyer to resell without making a loss. There are about 30 apartments listed for resale at present.

As at mid July 2009, there were 23 apartments listed for rent by the onsite manager. There are over 40 rental listings on realestate.com.au. Rents for unfurnished apartments are:

• 2 bedrooms: $500 to $600 per week
• 3 bedrooms: most in the $700 to $790 per week range, although one is listed at $590 per week and another at $600 per week
  

So let's compare with Parklands at Sherwood. The Parklands apartments don't have river views, and are smaller than Tennyson. But the location is better, and the pool area is superior.

Tennyson - 2 bedroom sold for $990,000 and rents for $500 per week
Parklands - 2 bedroom sold for $495,000 and rents for $450 per week

Tennyson - 3 bedroom sold for $1,400,000 and rents for $720 per week
Parklands - 3 bedroom sold for $700,000 and rents for $570 per week

The Tennyson apartments are double in price, but the rent is not.

Tennyson Reach Price Drop

From a Mirvac email:

"We have just been advised that commencing immediately the current prices have been reviewed offering substantial savings on most apartments. 3 Bedroom apartments now commence at $845,000."

Current representative prices for the off-the-plan apartments:

• 3 bed 2 bath, with family room, end apartment and floor-thu, 230sqm in total, level 4, for sale at $960,000
• 2 bed, 2 bath, 190sqm total (so very large), floor-thu, level 6, for sale at $810,000
• 3 bed, 2 bath, with family room, floor-thu, 235sqm, level 4, for sale at $1,165,000

Mirvac Sues Many

Mirvac Queensland has recently launched a number of lawsuits in the Supreme Court of Queensland. These lawsuits appear to seek performance of off-the-plan contracts for Tennyson Reach, where the buyer did not settle. Buyers that have been sued include McGann, MG Taylor Nominees, O'Hagan, De Pasquale, Holland, Crooks, Douyere, Thompson, Ibencastle Pty Ltd, Beioley, Campbell, Horne, and others. It would appear that Mirvac believes that the apartments that swiftly sold a few years ago off the plan are now worth less than the contract price? In the third stage of Tennyson Reach, about 70 apartments remain for sale in the Farringford Building. There are at least 12 apartments in stages one and two listed for resale. When I visited recently, the development seemed like a ghost town.

Mirvac's Tennyson Reach

Mirvac's Tennyson Reach (Stage One - the first two apartment buildings) is complete, and residents will be moving in this month.

I visited the display apartment at Mirvac's Tennyson Reach apartment complex. The apartment was on the 6th floor of the Softstone building -- it is a 3 bedroom apartment -- a "floor through" apartment with the main bedroom and a balcony at the front and two bedrooms at the rear. The view from the main bedroom, with floor to ceiling glass, was absolutely fantastic. A great view up river towards Indooroopilly, and you can see the city in the other direction. The Indooroopilly Gold Course is across the river.

The quality of the apartment was A1 plus. Plenty of room. The lighting was particularly clever. I loved the apartment and the view to the river. The view out the back was so-so. If the apartment was not so expensive (about $1.7M for the display apartment) and the location was not so remote, then I would definitely buy!

There seem to be more than 30 apartments listed for re-sale on RealEstate.com.au. Some examples:

• 3 bedroom, 226sqm, 7th floor, $1,850,000
• 3 bedroom, 3rd floor, $1,380,000
• 3 bedroom, 5th floor, $1,600,000
• 2 bedroom, 6th floor, $1,150,000

Tennis Anyone?

Mirvac's Tennyson Reach project sold extremely well to start, but sales appear to have stalled. There are six apartment buildings planned for the site, at Tennyson in Brisbane on the same site as the Queensland Tennis Centre. Although more than 65,000 tennis spectators attended the recent tournament last week, no apartments were sold during the event.

The first two apartment buildings on the site, containing 115 apartments released in June 2007, sold out in three days. Prices ranged from $943,000 to $4.9M. These two buildings should be read for occupancy in the next 5 months.

The third building, currently for sale off the plan, has 92 apartments. Released in December 2007, 70 apartments still remain for sale. Originally marketed with a minimum price of $805,000, the minimum advertised price has now been reduced to $698,000.

According to the AFR, Mirvac plans to release building 4 at the end of 2009.

There are more than 10 resales listed on RealEstate.com.au. These include:

• 3 bed on 6th floor, listed at $1,820,000 (155sqm of internal living plus 15sqm of balcony)
• 3 bed on 5th floor, listed at $1,795,000 (174sqm of internal living plus 21sqm of balcony)
• 3 bed on 4th floor, listed at $1,395,000 (169sqm of internal living plus 21sqm of balcony)
• 3 bed on 2nd floor (so restricted river views I suspect), listed at $1,515,000 (162sqm of internal living plus 15sqm of balcony)

My guess is that these prices will drop, as a number of owners will not want to or can't settle, and rents for these apartments will be luck to be more than $800 a week.

Tennyson Reach video

Mirvac's Tennyson Reach video.

Mirvac's Tennyson

According to the Australian Financial Review, a penthouse apartment in Mirvac's Tennyson Reach development recently sold off-the-plan for $5.25 million. It is 731 sqm. The second stage (92 apartments) is reported to be 25% sold.