MaxCap sees a return of inner-city Melbourne apartments

Published with full permission of the AFR.

 

MaxCap Group has funded developer Salvo’s mixed-use residential project in Melbourne’s Southbank, reflecting a move by funders back towards inner-city apartments in the Victorian capital.

The non-bank lender is providing a $75 million first-mortgage for the development of Stature, a 35-level mixed-use tower with 175 apartments, six levels and 2300 square metres of commercial office space and 150 square metres of ground-floor retail space at 35-51 Hancock Street.

The project has an end value of $125 million.

The market was still far from the environment five years ago when developers and funders were rushing to secure and sell projects in the Melbourne CBD and fringe suburbs, but conditions were strengthening, said Johnny Woodhouse, MaxCap’s state director for Victoria.

“We are seeing sales,” Mr Woodhouse said.

“They’re not pre-pandemic levels, but we are seeing a decent pickup. We’re in discussion with another group for another development nearby.”

Attached dwelling approvals – of apartments, townhouses and semi-detached homes – in Victoria are picking up. In the year to August, the total rose to 20,578, the highest since January.

The majority of developments in Melbourne were currently low- to mid-rise projects in established suburbs and relatively few are high-rise towers, but these projects were still selling and – importantly – settling, as Salvo’s separate, Westpac-funded Palladium project at 251 City Road had shown, Mr Woodhouse said.

Sales had reached the 65 per cent of debt cover required to kick off construction – just under $49 million worth of sales. The average sales price across the project was $9500 per square metre, Mr Woodhouse said.

Maxcon is the builder and the Stature project was one of a number of sites, along with the $220 million Panorama Box Hill high-rise residential project that suffered COVID-19 outbreaks early last month. This had not affected the building schedule of the Stature project, however, he said.

“The program has not been impacted at this point,” Mr Woodhouse said. “They’re not the only developer who’s had an outbreak we’ve been funding.”

Sales were resilient on Melbourne’s southern edge, he said.

“It’s a good thing about Southbank,” Mr Woodhouse said. “You get a mix of investor sales but also owner-occupiers. A lot of the initial sales will be FIRB sales [to overseas buyers requiring permission to acquire property] plus younger purchasers looking to locate close to work, close to amenities.”

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