Non-bank lender MaxCap is providing Franze Developments with a $97 million first-mortgage facility to build a two-tower residential and hotel complex in the regional Victorian city of Geelong.
The Geelong Quarter project at 44 Ryrie Street, will have an end value of $200 million. It will include 124 residential apartments and a 180-room hotel with internal swimming pool, gym and restaurant.
The project aims to capitalise on the growing popularity of life outside Melbourne, in part driven by the pandemic, said Johnny Woodhouse, MaxCap’s state director for Victoria.
“When I go to Geelong it reminds me of the regeneration of [inner-city Brisbane’s] Fortitude Valley in terms of the quality of amenity now available.,” Mr Woodhouse said.
“But it doesn’t have the same supply at this point.”
The project will be constructed in two parts. Stage one will comprise 109 apartments, in a 14-level tower. Stage 2, in a 15-level building, will include 15 premium apartments and the hotel, to operate under Holiday Inn & Suites Hotel brand. Privately owned Maxcon Constructions will be the builder.
Presales in stage one were “north of” $30 million and apartments in that building sold on average for $9000 per square metre, Mr Woodhouse said. Residential sales in the second stage, which averaged $10,500 per sq m, stood at about $21.5 million, he said.
Construction has begun on the first tower and work on the second was likely to start within months, Mr Woodhouse said.
The two buildings, separated by a pedestrian laneway, will also have ground-level retail tenancies and one commercial office space.
MaxCap is also providing a separate mezzanine loan on the project that Mr Woodhouse declined to value. It will push up the developer’s overall gearing on the project, however.
Gearing at point of completion – before the hotel asset is stabilised and has a trading record – will stand at about 65 per cent. With the addition of the mezzanine loan, that would rise to about 70 per cent, Mr Woodhouse said.
The previously industrial city on the western edge of Port Phillip Bay is changing into one driven by services that is also pitching its proximity to Melbourne and cheaper housing prices as a drawcard.
New employers setting up premises in recent years include the NDIA federal government agency administering the National Disability Insurance Scheme.
Investors are also being drawn to the region. In March, the Woolworths-anchored Bellarine Village Shopping Centre near Geelong sold for $38 million, the second sale in less than three years, on a sub-5 per cent yield on passing income that reflected the volume of capital looking for neighbourhood and sub-regional assets.
GeelongPort, Victoria’s second-biggest port that handles more than $7 billion worth of trade annually, or 12 million tonnes of cargo, is also currently in play, with investment giant Brookfield keen to sell its 50 per cent stake in the asset, which some investors say has a $1.8 billion value.
Published with full permission of the AFR. Original article here.