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 Lawsuit Judgment

As previously noted, Mirvac is suing a number of its off-the-plan customers for failure to settle at the over-priced Tennyson Reach development. Mirvac was recently successful in court on one issue. A purchaser claimed that the lot size of the apartment was 1sqm less than shown on the plan. This is what the court said on this issue:

"The contract provided that the seller could make changes to the size of a lot of up to five per cent (more or less) than that shown in the Disclosure Statement. Accordingly, the description of the floor area on the plan insofar as it operated to clearly identify the lot should be taken to be up to five per cent different (more or less) from 177 m2, namely that it would have an area of between 168.15 m2 and 185.85 m2. On this basis the reduction in the size of the balcony by 1 m2 as depicted on later plans including plans that became part of the second further statement did not mean that the Disclosure Statement contained information concerning the floor area of the proposed lot that became inaccurate.

In short, insofar as the description of the floor area served to clearly identify the lot, the floor area was to be between 168.15 m2 and 185.85 m2 and this information did not become inaccurate after the Disclosure Statement was given. On this basis, the reduction in the size of the balcony by 1 m2 did not give rise to an inaccuracy that the plaintiff was required to address in a rectification statement under s 22."

The leason to learn here is that most off-the-plan contracts have a clause that says that apartment sizes can vary. In this case, the purchaser could have ended up with 10sqm less than what they believed they were getting, and would still be required to settle.

See http://archive.sclqld.org.au/qjudgment/2009/QSC09-269.pdf

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.

Predictions for 2009

At the beginning of 2008, I made a number of predictions in this post.

The predictions were mostly wrong!

The Brisbane apartment market did not grow significantly in 2008, and took a minor step backwards. At present, there are fewer buyers and more sellers. For some off-the-plan developments, no sales have been made for months. Second tier buildings and buildings with more than 200 apartments have not done well.

So I will be careful with my predictions for 2009:

I still believe that quality inner city apartments in Brisbane will do well in 2009. Provided there is no significant unemployment and provided that foreign students continue to come to Brisbane, vacancy rates will remain low.

In 2008, only four new inner city apartment buildings completed and settled. These were Evolution (over priced), M on Mary (which has mostly 1 bedroom apartments, and the developer is now in liquidation), Flow at West End and Iceworks at Paddington. In 2009, no new large inner city apartments will settle. Groundwork has started on Mertion's Soleil and the Trilogy Tower project, but these will no complete until 2012. Mirvac's Tennyson Reach project will settle two buildings in 2009, and FKP's SL8 at West End will also probably complete in 2009. So not much new stock.

So here are some predictions for 2009:

• The price of a good quality 2 bedroom 2 bathroom apartment in Brisbane, with views, will range from $780,000 to $850,000.
• The price of an average quality 2 bedroom 2 bathroom apartment in Brisbane will struggle to pass $550,000.
• Average rent for an unfurnished 2 bedroom apartment will rise to $600 per week.
• Investors will return to the market, as interest rates are falling and rents are rising.
• There will be more action in the inner suburbs than in the city. Prices for quality apartments in areas such as Indooroopilly and Toowong (where there is a train station and regional shopping, close to education facilities) will boom. By the end on 2008, it will be hard to find a good quality 2 bedroom apartment in these areas for less than $600,000.

• The Gold Coast apartment market will tank even more. The Sunshine Coast apartment market will remain steady.

Future Brisbane Apartment Developments

There is likely to be a shortage of apartments in Brisbane in the near future. (This statement assumes that that is not massive unemployment in Brisbane.) There are few developments under construction, and so very little new stock will come onto the market in the next three years. What new stock remains unsold is either overpriced or poor quality.

Downtown Apartments

• M on Mary - completed - mostly poor quality 1 bedroom apartments, mostly unsold. Developer has ceased sales campaign and is running this building as short term accommodation
• Evolution - completed - about 20 apartments unsold - small and overpriced
• Skyline - completed - about 20 apartments unsold - building surrounded by other buildings, and generally overpriced
• Aurora - completed
  
• Empire Square - cancelled
• Trilogy Tower - status uncertain - in presales, with planned completion in 2012 - both hotel rooms and expensive apartments
• Vision - status uncertain - in presales, with completion not before 2012
  
• Soleil Tower - soon to start presales - 403 apartments, with completion about 2011
• French Quarter - early days, no planning approval
  

Inner City

• Flow (West End) - completed - about 5 remain unsold, will negotiate on price to sell
  
• Koko (West End) - completed - about 5 remain unsold, will negotiate on price to sell
• Tempo (West End) - completed - about 5 remain unsold, will negotiate on price to sell
• IceWorks (Paddington) - almost complete - about 6 apartments remain unsold
  
• SL8 (West End) - under construction, with completion expected in April 2009, poor location
• Waters Edge (West End) - off-the-plan selling, overpriced and selling poorly, completion in 2010
• Ciana (Indooroopilly) - almost complete - about 25 out of 130 apartments remain unsold - good value
  
• Tennyson Reach - 2 buildings nearing completion, 1 building not far behind, 3 more buildings planned
• Newstead Waterfront - 2 buildings selling well off-the-plan
• The Mill at Albion - almost sold out, relatively expensive
• El Dorado Village - to be launched to the marketing in October 2008, completion likely in 2011
• Milton Union - received planning approval

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.

New Apartment Prices in Brisbane

1. Trilogy Hotel Rooms (studios & two bedrooms)

• levels 36 to 47
• 16 apartments per floor
• sold fully furnished with 2 year rent guarantee
• hotel managed by Mirvac
• sizes range from 53 sqm to 89 sqm
• no balcony
• 3 elevators
  
• about half will have river views
• most do not have car parking
• completion about 2012
  

Average price per apartment on level 36: $639,000
Average price per square metre on level 36: $9,785

Average price per apartment on level 47: $695,000
Average price per square metre on level 47: $10,630

2. Empire Square (two and three bedrooms)

• levels 47 to 60
• 7 apartments per floor
• sold unfurnished
• hotel managed by Westin
• sizes range from 117 sqm to 150 sqm
• no balcony
• 5 elevators plus service elevator
• about half will have river views
• 1 or 2 car parks per apartment
• completion about 2012
  

Average price per apartment on level 47: $1,502,857
Average price per square metre on level 47: $11,336

3. Aurora Skyhome

• levels 64 to 65
  
• 5 apartments per floor
• sold unfurnished
• managed by Oaks
• 2 and 3 bed apartments
• four with river views
• 2 car parks per apartment
• completed in 2006
• Last year, apartment 643 on level 64 was listed at $1,095,000. 2 bed, 2 bath, 2 cars, 102 sqm internal, 125 sqm total, $8,760 per sqm metre

4. Pinnacle Parklands

• levels 4 to 12
• 5 apartments per floor
• range of sizes
• No river views - views of Roma Street Parklands
• completed 2007
  
• Last year, a 3 bed/2 bath/media room/3 car park display apartment about level 5 was being sold furnished at $1,675,000. 184 sqm internal, 257 sqm total, $6,517 per sqm.
  

5. Tennyson Reach

• five buildings, each around 10 floors
• some floors have 8 apartments, some 2 apartments
• range of sizes
• almost all have river views
• to be completed in about 2010
• about 1 elevator per 3 apartments per floor

Examples

• 2 bed, 2 bath, 111 sqm internal, 141 sqm total, 5th floor, $910,000 ($6,453 per sqm)
• 3 bed, 2 bath, 192 sqm internal, 227 sqm total, 4th floor, $1,320,000 ($5,814 per sqm)
• 3 bed, 2 bath, 189 sqm internal, 235 sqm total, 5th floor, $1,475,000 ($6,276 per sqm)

Brisbane Videos

These interesting videos show future developments for Brisbane. So take care when buying -- some existing buildings will loose their views; and there will be a huge influx of apartments into Brisbane in the future.

http://www.youtube.com/watch?v=BmGWIbOYZmU

http://www.youtube.com/watch?v=l687g1Ub5qM&feature=related

Trilogy Tower

Wickham Terrace & Turbot Street (Central Station)

Vision

Tennyson Reach

NorthBridge (office development, which will block some views from Evolution)

Brisbane Now, from PleaseTakeMeTo.com

Mirvac's Results

Mirvac's results release yesterday included the following information:

• Tennyson Reach QLD - $203m in exchanged contracts
• Queensland residential pipeline forecast for apartments - $1,865m
• Housing market construction activity through FY08
  - Strong: VIC, QLD
  - Moderate: WA, SA
  - Recovering: NSW - but still below long-term trend through 2008
• Inter-state economic outlook
  - Strong: WA, QLD
  - Moderate: VIC
  - Recovering: NSW

http://www.mirvac.com.au/investor/pdf/20080212_WebPres.pdf

TENNYSON DEVELOPMENT: Acquired Aug 05, Project Value $574m, Total Lots - 393; Released Lots - 207; Exchanged Lots -126
Tennyson Breakdown:
Softstone & Lushington Project Value $191m; Total Lots: 115 Released: 115; Exchanged: 115 (Settlement Apr 2009 to July 2009) Price Range: $940,000 – $4.9m
Farringford Project Value $126m; Total Lots 92; Released Lots 92; Exchanged: 11 (Settlement Sep 2009 to Jan 2010) Price Range: $805,000 – $4.9m
Pamphlett Project Value $109m; Total Lots: 82 (Settlement July 2010 to November 2010); Price Range: $695,000 – $3.2m
Parsons Project Value $96m Total Lots 67 (Settlement July 2011 to Nov 2011); Price Range: $885,000 – $3.3m
Somersby Project Value: $53m Total Lots 37 (Settlement July 11 to Nov 2011) Price Range: $885,000 – $3.3m

Newstead River Park: 631 apartments, settlement not until June 2010 to June 2014: Price Range: $800,000 – $6.0m

http://www.mirvac.com.au/investor/pdf/20080212_HYReport.pdf