Resi Challenges Typified in Hurstville Site Sale by Wingate13 February 2020
The residential apartment market has had a difficult few years and a recent sale of an interest in a site at Huntsville is typical of the challenges the market has presented.
Developer Fridcorp, together with its long-standing joint venture partner Wingate, paid $90m for 93 Forest Rd Hurstville in April 2016. The site was sold by East Quarter Group. There was an existing development approval for 400 units and a supermarket, however Fridcorp planned to increase it to 550 and build a larger retail precinct.
The group finally received Development Approval in May 2017 for a mixed use development comprising 556 units and 4,345 square metres of retail space in 2 buildings of 9 and 21 storeys with basement and parking.
The project commenced a pre-sale campaign and secured around $200m in pre-sales (circa 285 apartments). The delay in the planning process unfortunately coincided with the Banking Royal Commission, the Labour party's pre-election negative gearing policy and the Opal Tower construction issues which reduced investor confidence in the market, halting pre-sales and creating challenges in the funding of the project.
Sources suggest that Wingate stepped in to fund the acquisition of the land during the planning phase in order to retain the project however as the funding and pre-sale constraints began to bite, Wingate were keen to offload the project and began a site sale campaign in May 2019.
Differences of opinion on investment strategy between joint venture partners can be difficult to resolve and often lead to assets being sold subject to pre-emptive rights to a party who may wish to remain.
Fridcorp indicated that a number of offers were made however were not compelling enough. Fridcorp proceeded to secure fresh capital from Hong Kong to acquire the Wingate interest and advance construction of the project.
Fridcorp will now deliver the Woolworths supermarket and associated retail, as well as the 200 apartments – 70 per cent of which have already been sold – in stage one with the apartments due for completion in early 2021.