Super Jumps Into Non-Bank Lending.
Australia’s biggest industry super fund has teamed up with non-bank lender MaxCap Group to offer large-scale loans direct to developers in the commercial property sector. Australian Super is understood to be financing commercial property projects up to $150 million in value at a time when the big four banks are shrinking their exposure and restricting development funding amid fears of oversupply, particularly in the apartment sector. (SMH, 20 July)
Non-bank lending in property increases
Non-bank lender Qualitas is providing a $33.5 million loan to a residential project by BPM, one of Melbourne’s largest private developers, alongside funding from Westpac and Bankwest. (AFR, 1 Sept). The $300m project has seen 90% of its 468 apartments sold with a quarter from offshore buyers.
Meanwhile several non-bank lenders have also increased activity:
- US funds giant Invesco is reportedly lending about $150 million to develop Brisbane’s next tallest tower. The 90 storey tower with 1128 apartments is being developed by AMP Capital and Billbergia. (AFR, 25 Aug)
- Credit Suisse backed Metro Property Developments with a $65m loan, according to the AFR. Chifley Securities said it increased its loan book to developers and builders by 35 per cent to $638 million in the year to June 30. AFR, 23 Aug)
- CT Johnson will reveal other non-bank lenders in his presentation at BasisPoint’s non bank lending conference on Sept 22. These include Development Finance Partners, MaxCap, LaTrobe and Zank amongst others who also have been cited in the media in recent months
How big is the demand for loans from offshore buyers?
- 200,000 apartments due for settlement next 2 years, mostly on the East coast of Australia
- Average price say $600,000 x 90% = $108 bll (10% paid as the deposit)
- Approx 15% of new apartment buyers are offshore investors, according to NAB surveys last year x $108bll = $16 bll in capital required by offshore buyers to complete purchases
- 71% of Chinese buyers of property in the US pay in cash (see our previous newsletter)
- Assume same ratio = $4.6 bll in loans required from offshore buyers
Aus-China Non-Bank Lending Conference, 22 Sept 2016 | Westin, Grand Ballroom, Sydney Click here
NSW Strata Law Change -opportunities for site acquisitions from the 75% majority rule, when fairness meets fortunes,28 Sept 2016, Sydney Click here
Critical mass growing in the Gold Coast
Continuing our theme of ‘critical mass’ in property development with Chinese capital as the catalyst (see our April newsletter) the Gold Coast is gentrifying in the lead up to the 2018 Commonwealth Games.
Chinese conglomerate Forise Holdings has received approval from Gold Coast City Council’s planning committee for its $1.1b Surfers Paradise apartment tower. (The Australian, 1 Sept.)
This adds to the Wanda/Ridong $1 bll Jewel tower and hotel complex, as well as other hotel, theme park and residential tower projects already announced –see newsletters from April and last week.
The critical mass has been boosted by the opening of AMP Capital’s $670 million redevelopment of the old Pacific Fair shopping mall in Broadbeach Waters into a luxury shopping precinct.
Meanwhile, 6117 hectares of sugarcane land more than 10 times the size of Surfers Paradise is for sale in the area between Brisbane and the Gold Coast.
News.com.au (1 Sept) reported that 40 landowners have agreed to sell as a combined parcel what will likely be a national sales record in excess of $1 bll. The land was uneconomic for the growing of sugarcane, according to Landline 2 May 2016)
The Gold Coast Airport recorded an 18 per cent increase in international arrivals for FY 2015-16.
Aus-China property deals
Malaysian developer SP Setia has lodged plans for a $640 million 69 storey twin tower project in central Melbourne. The development will comprise 500 apartments and 520 hotel rooms. (AFR, 30 Aug). It will be the 5th VIC project for the developer, one of the largest in Malaysia.
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Sydney-based private hotel company Staywell Hospitality Group (co-founded by Simon Wan) has sold its Park Regis Hotel in the Sydney CBD to a Chinese private capital group for $46 million. (AFR, 29 Aug).
The same Chinese group is also currently in exclusive due diligence to buy the residential development-approved 333 Kent Street building for $90 million. (see last week’s newsletter. Chinese-backed Maville is the seller.
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Melbourne-based AXF Group, controlled by Richard Gu, is switching from property to mining. The developer has sold all but one of its property holdings over the past two years for about $700 million. (The Australian, 27 Aug)
Mr Gu, the scion of a well-established Chinese developer in Shanghai has since spent more than $100m in buying mining assets in the Solomon Islands and in Western Australia. He has now hired a team of 50 in Perth to oversee the business
He told the Australian is not just about switching asset classes at the turn of cycles but more to do with too much competition in property from Chinese state-owned and listed developers entering Australia.
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We recently reported on the St Leonard’s NSW precinct being the next critical mass hotspot. AFR (22 August) said that local developer Dyldam is poised to sell its 777 apartment site just two months after buying it for almost $120 million, with Chinese developers interested.
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Far East Consortium (FEC) has signed a contract to purchase a key section of the Western Australia Government’s Perth City Link project. The mixed-use development will deliver more than 350 residential apartments and 250 hotel rooms managed by Dorsett.
Meanwhile FEC has commenced work on its Towers project in Perth’s Elizabeth Quay, which features The Ritz-Carlton hotel and is expected to be completed in 2019.
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Remarks from Shanghai re financing:
- Mark Yin, an agent with Shanghai-based Home Tree Group told the AFR (26 Aug) ‘all the (Australian bank financing) deals have been frozen,’
- Lanny Xu , CEO of Iron Fish China told the AFR that while most of his clients were not affected by the change, about 20 per cent were trying to on-sell apartments because they were unable to complete settlement.
Crackdown on illegal resi property buyers nets 30 cases
More than a year after announcing the crackdown on illegal purchases of Australian residential property, a total of 30 properties worth $78m have been subject to forced divestments, according to the ATO in reply to a Freedom of Information (FOI) request from the ABC.
The ATO (Australian Tax Office) identified more than 270 breaches of the foreign investment rules and issued 150 penalty notices in the year to June, 2016. Those penalties totaled $695,000, or an average of $4,600 each.
21% breaches resulted in a forced sale or voluntary divestment, (ie 57 properties), 23% received amendments to a previous investment approval and 56% have been granted retrospective approval for their purchase. The percentage by Chinese buyers were not disclosed although buyers from Taiwan, Malaysia, Canada, India and the US were identified previously (see our article April 2016)
In comparison, there have been 56,000 FIRB approvals for Chinese buyers in the past 5 years.
Aus-China Non-Bank Lending Conference, 22 Sept 2016 | Westin, Grand Ballroom, Sydney Click here
NSW Strata Law Change -opportunities for site acquisitions from the 75% majority rule, when fairness meets fortunes,28 Sept 2016, Sydney Click here