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November 14, 2013

Developers cautiously back into high-end projects

STANDING on the balcony of the Bluewater apartment building in Scarborough, it’s easy to be impressed by the million-dollar views. It’s a similar story at the Taskers site in North Fremantle, where a viewing tower looks out over both the river and ocean.

These are among the handful of apartment projects in Perth targeting the top end of the market. It’s a market segment that has hit some developers hard, particularly in the aftermath of the GFC.

Port Bouvard’s namesake project south of Mandurah, Finbar’s Leighton apartments and the Rivershores apartments in North Fremantle all have a rocky history. Despite this, a handful of developers Developers have ventured back into the upper end of the market.

Westland Investments’ Dalkeith on Waratah comprises 31 luxury apartments, with prices starting from $1.5 million. Finbar has also become active, with its Symphony City high-rise projects in the city, and the 52 Mill Point development in South Perth, which has eight apartments and an average price of $2.27 million.

The Bluewater and Taskers projects have been put together by developer Gary Dempsey, with AFG Property being the joint venture partner at Taskers.

Mr Dempsey said the demand for his luxury apartments is borne out by the pre-sales. He has achieved 80 per cent pre-sales at Bluewater and 70 per cent pre-sales at the first stage of the Taskers project.

Most of the buying interest has come from people living near the beach or in the western suburbs, who want to downsize from their family home.

“They want something smaller but they still want the quality of the homes they lived in,” Mr Dempsey said.

“We will have the exact same specifications, for fittings and finishes, as luxury houses.”

Mr Dempsey is the developer and builder of both projects, and takes an active role in sales and marketing. He believes this integrated model is key to his operation, as it gives him full control over the quality of the end product.

He also believes being close to his market is an advantage.

“I only want to develop in areas that I would want to live,” Mr Dempsey said. He has seen other developers get into strife because they don’t really understand
the local market.

“Some of the national and international developers assume if something works in Sydney or Melbourne, it will work here.”

HISTORY

Mr Dempsey started off building houses and duplexes, and later set up commercial builder Strategic. His experience as a developer included a luxury apartment project in South Perth about a decade ago.

“That did extremely well, so I decided there was a market for the top-end apartments,” he said.

His approach to that development is similar to what he is doing at Scarborough and North Fremantle. “We did something unprecedented at the time, we had three high quality units; we could have built nine on that site but that’s not the kind of project I wanted,” Mr Dempsey said.

It’s been a long effort getting his current developments off the ground but Mr Dempsey seems pleased with progress to this point. “I was really frustrated before; this is what I’ve always wanted to do,” he said.

Bluewater comprises 36 luxury apartments, ranging in price from $627,000 to $3.75 million.

“We could have put a lot more apartments on the site if we wanted to but that comes at a cost to the overall amenity,” he said. Similarly, the price range at Taskers is from $585,000 for a one-bedroom apartment up to $5 million.

Walking through Bluewater, Mr Dempsey points out features that make it a cut above the average apartment project in Perth.

These include stone benches, high ceilings in the living areas, large balconies overlooking the ocean, extra insulation on the walls to block sound from neighbouring apartments, along with double glazing, double windows and double sliding doors to block noise from West Coast Highway.

Like any property developer, one of the big challenges facing Mr Dempsey is getting financial backing.

“The lenders haven’t been in tune with what’s going on in the local market,” he said. “Typically decisions are made in Sydney or Melbourne. “It took them a long time to get their heads around this.”

At Bluewater, he brought in several individuals as co-investors, with St George Bank providing the debt funding. At Taskers, AFG Property came in as joint venture partner while NAB is the senior lender.

“Private financiers have started approaching me, so it will be easier for my next project,” Mr Dempsey said.

TASKERS SAGA

The Taskers development will comprise 130 apartments, built in four stages, along with eight three-storey town houses. Communal features will include a cafe in stage 1, along with 3,000 square metres of parkland, a 25-metre lap pool and a gym.

An eight-metre deep excavation of the limestone base has been completed, allowing construction of the basement to start last month. Mr Dempsey has been working on the project for the better part of a decade.

Initially the project was stalled while waiting for planning approval from former minister Alannah MacTiernan.

Then it was delayed by objections from the former Fremantle council, in part because councillors considered six storeys to be highrise.

Mr Dempsey responded by appealing to the State Administrative Tribunal. “They gave us full approval,” Mr Dempsey said, though only after paying $400,000 on expert consultants and in legal fees.

The tribunal ruled that the structure plan for the Taskers site would have “an acceptable visual impact” and was “an appropriate urban design response to its site and locality”.

Tony Beamish’s investment group SAS Global went to the SAT at the same time, in a bid to get approval for a planned development on the neighbouring One Steel site. SAS Global, which later collapsed under the weight of its debts, was not successful, with the tribunal deciding that its larger building, up to 12 storeys in height, would have a “significant and detrimental visual impact”.

The tribunal ruling, delivered in March 2009, was followed soon after by the GFC. Mr Dempsey spent the next two years refining his plans for the project.

The stage 1 development, with 51 apartments and four penthouses, is about 70 per cent sold. Based on progress to date, Mr Dempsey expects to launch stage 2, with two apartment buildings and eight townhouses, later this year.

Article written by Mark Beyer, published in the November 14th, 2013 issue of Business News.

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