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Adelaide Infill Development - Three townhouses, significant tree

Discussion in 'Development' started by Lara Lansell, 7th Oct, 2016.

  1. Lara Lansell

    Lara Lansell Member

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    Long time lurker, first thread! Hope to share the experience on this project to generate discussion and offer some insights / bounce ideas around.

    What: 1 into 3 infill townhouses

    Where: Dernancourt, South Australia in Adelaide's North East

    Most of Adelaide's North East meets the criteria put forward by a paper by the OVGA (for Melbourne) for what makes "good infill"

    o Middle ring suburb, 10km from the CBD
    o Developed in the 1950s to 1970s, aging dwelling stock
    o No heritage overlays

    Dernancourt and Highbury are the highest priced median suburbs covered by the City of Tea Tree Gully Development Plan - one of the more favourable Development Plans that cover metro Adelaide.
     
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  2. Lara Lansell

    Lara Lansell Member

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    Site Selection

    593m2 / 18m frontage x 33m / single storey solid brick 3 bedder

    The Good:

    · Ticked all the boxes under the Adelaide: 30 Year Plan for infill - 4 from 4 of the walkability criteria: <200m to high frequency public transport along the O-Bahn corridor, <100m to large public open space, <1km to nearest primary school, <400m to shops.

    · Site on market for 100+ days - vendors were investors holding an untenanted property that needed a lot of $$ to bring up to scratch

    · Examples on infill development nearby (courtyard style; common driveways) including one under construction around the corner

    The Not So Good

    1. East / west aspect

    2. 593m2 is below the Development Plan minimum to subdivide (300m2 for detached, 200m2 for row)

    3. "Main" road location - state (DPTI) arterial roads in Adelaide are generally restricted to 1 crossover per 20m

    The Bad

    4. A really, really big gum tree located in the backyard

    An LTO search pulled the original survey plans in inches and feet - turns out the listing agent relied on RP Data which, presumably, rounds boundary dimensions - calculating from the original survey plan showed the site actually at 606m2 - a few precious inches makes all the difference. A call to a surveyor that I had used on another project showed the road, although being a "main" road on Google Maps, wasn't a DPTI arterial - multiple crossovers would be possible!

    Despite derisking 2 and 3, initial contact with agent suggested the vendors weren't interested in a "subject to DA" nor a long drawn out settlement. Offered a 60-day settlement, no finance clause on Thursday and the vendor accepted on Friday.

    In SA, there's two business day cooling off that starts when the Vendor's Statement is issued - luckily enough the Vendor's conveyancer hadn't yet prepared the Form 1. This allowed for a few days to cram in the remaining due diligence. An arborist went out to site on the Monday and confirmed the tree was significant that had to stay - not good! The surveyor was on site to take detail / contour / levels on Monday too and turned around the drawings on Tuesday - as the tree was right at the back of the block, there was a still a suitable building envelope - yay!

    Outcome: Derisked the opportunity prior to contracts becoming unconditional. Purchased the site for just under $340,000 - 30% below the median price for the suburb and ~$100,000 less than comparable development sites in the suburb.
     
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  3. Lara Lansell

    Lara Lansell Member

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    Concept / Town Planning

    The concept is a 1 into 3, row dwelling subdivision with each townhouse being on its own Torrens Title with its own street frontage. Given the constraint on the significant tree, a two-storey form with massing toward the street frontage would avoid overshadowing of the southern neighbour's existing private open space.

    Market analysis of comparable 3 bed / 2 baths in the area showed that 2 garage townhouses were expected at the $460+ price range - given the constraint on frontage allowing one garage - the design brief looked at ~150 / 160m2 GFA to be competitive in the low $400s.
     

    Attached Files:

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  4. D.T.

    D.T. Adelaide Property Manager Business Member

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    Sounds awesome.

    Regarding the tree, might know an arborist who might know how to write reports that might convince council to maybe allow removal ;)

    Is the plan to sell or rent on completion? If so have you factored in GST , sales agent fees / PM fees?
     
  5. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Thats good news... dpti aterials also have the requirement to exit in a forward direction so internal turning bay needs to be allowed for
     
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  6. Yujin

    Yujin Member

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    Hi @Lara Lansell this sounds awesome!

    Is the site DA approved? What's the timeframe for completion? 12 months?

    For our learning experience are you able to provide a detailed feaso study to understand the numbers ?

    Also how did you find the deal?
    • Realestate.com/domain?
    • Offmarket through agent?
    • Doorknocking/letter drops?
     
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  7. Xenia

    Xenia Adelaide Property Manager Business Member

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    Love your work Lara
     
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  8. MTR

    MTR Well-Known Member Premium Member

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    Sounds great Lara
    I had 3 significant trees on my deve site and vegetation overlay , I understand your pain. Fortunately they were in poor condition so they can be removed

    Look forward to your progress:)

    MTR
     
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  9. Lara Lansell

    Lara Lansell Member

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    Planning Consent

    Having the contour / detail survey done during exchange allowed design / engineering to happen whilst awaiting settlement. Lodged plans including an arborist report (to retain the tree) two weeks before settlement.

    Council came back with two requests – an overshadowing diagram (two-storey build, poor east-west aspect!) and a request to flip Dwelling 2 in order to maintain an onstreet car parking space. To achieve the latter, they even offered to move a street tree on the council verge at no cost! Unlike many areas in Melbourne, this didn’t require Public Notification.

    Total time with Council: approx 8 weeks from lodgement to Land Division and Development Plan Consent.


    Screening feasibility and a cost breakdown below -
    • 3% to 40% return on TDC; base case of ~22% return on TDC before tax / ~85% return on capital employed depending on gearing.
    • Ranging construction costs between $1200 and $1450/m2; biggest driver is the end value sensitivity +/- 10%


    upload_2016-10-7_21-7-42.png

    upload_2016-10-7_21-8-38.png
     
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  10. MTR

    MTR Well-Known Member Premium Member

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    What's the end plan?

    Can you tell us what is happening in this Market?
     
  11. D.T.

    D.T. Adelaide Property Manager Business Member

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    A couple people have adel dev threads up, definitely recommend you give them a read. Its a very different beast here than other states.
     
  12. Brady

    Brady Well-Known Member

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    Great stuff, thanks for sharing. Interested to see the outcome. Are you selling all?
     
  13. Lara Lansell

    Lara Lansell Member

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    If the market stays where it is now (Base Case), the plan will be to sell, realise the tax liability and release the capital into a subsequent project in the area. Based on the current lending environment, it takes a big chunk of equity to 'hold' anything these days, even at 4 - 5% gross rental yields.

    I see rental growth tracking sideways for most of Adelaide's middle class, middle ring suburbs - its just so affordable. REA.com data shows flat asking rents for 3/1 houses in the area since 2012. Housing affordability is going to keep a lid on rental asking prices - based on median incomes and current interest rates, there's little point in paying $400/wk in rent when banks are offering OO interest rates starting with a 3!

    To that end, the finish will be spec'ced to attract owner occupiers - anticipate FHB interest at the price point and the fact it'll qualify for FHB Incentives. The HomeStart (SA Government lender) suggests a FHB can finance this with ~$20k deposit at a $435k sales price (3%) versus ~$35k (8%) for a detached home + land volume builder package. Not quite as attractive as the FHB plus stamp duty concessions for OTP apartments in SA (Prospect / Churchill / CBD) but hope this product fills the "Missing Middle" (as the Adelaide: 30 Year Plan calls it) to a full detached house.
     
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  14. Lara Lansell

    Lara Lansell Member

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    Design & Documentation

    ……and I'm over budget! The initial feaso budgeted $1200 to $1450 per m2 of GFA incl GST. Elemental cost breakdown came back over the weekend at ~$1900 per m2 -the finish is too high - turns out that subscription to HOUSES breeds expensive taste!

    A bit of background - I've opted for a fully documented design / tender / lump sum construct procurement method for this project - i.e. developer co-ordinates all the drawings, specifications, selections then goes to tender with two / three builders to get a fixed price contract. Simon Lee has a great discussion on the pitfalls and challenges - biggest learning so far is the a cost estimate pre-tender is well worth it.

    The fun part starts now - trying to get the right tradeoff between fit/finish and a marketable OO product.

    A few quick wins by reviewing the Specification line by line
    1. Zincalume in lieu of Colorbond on the roof materials - 10% cheaper supply from Lysaght for a roof you can't see !
    2. Increasing the porch depth by ~200mm to fit the meterbox into the porch (v. a free standing unit)
    3. Engineered flooring in lieu of solid timber
    The trickier decisions that might start impacting buyers
    1. Split System A/C to Master / Living and pre-wired junction boxes to the other bedrooms in lieu of ducted R/C
    2. Understair storage in lieu of a downstairs powder room
    3. Paved driveway in lieu of exposed aggregate
    4. Builders spec appliances v. Fisher & Paykel
    How does everyone else prioritise their spec? What areas are best to save / best to wow? Is it just a race to the bottom?
     
  15. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    For a 3 townhouse build consider going with a customised off the rack design with a volume builder. Dernancourt is not a primo upper class area and the shortcomings of a volume builder from a quality pov wont really be noticed vs a bespoke builder, especially on a main road where you have already halved your OO/tenant pool
     
  16. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Was doing the exact same thing for 1 of my devs over the last 5 hours , but i have plenty of room to move and still be at or above the spec level I need in order to develop what that market wants and be within budget . Imo you need to be at least offering what the market wants similar to the stock already selling. It's when you have to go lower than that standard to meet feasibility restraints where it's going to be game over, depending how much lower you need to go.

    Since the numbers coming back are way higher than your planned feaso ( a bad sign perhaps poor feaso or unreasonable specs selected ) I'd be looking to see what comparable stock finishes are and meeting that with perhaps a few WOW factors then see what the numbers look like.
     
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  17. MTR

    MTR Well-Known Member Premium Member

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    Good advice

    Build what buyers want
     
  18. MTR

    MTR Well-Known Member Premium Member

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    Contact local re agents find out what buyers want, in terms of spec and product, don't reinvent the wheel

    The build costs is way too high? I would only be paying this in upper market

    Structure crucial if trading/selling make sure you have a good accountant batting for you and use margin scheme

    Also look at scrapping for existing deve site just in case you don't sell

    If you can not sell what will be the cashflow position ?
    Ie hold 2 sell 1
    Sell 2 hold 1 etc
     
    Last edited: 10th Oct, 2016
  19. Brady

    Brady Well-Known Member

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    Check my costings for my level of finish in my thread. 3 townhouse should be able to get closer to $1500 per m2 with decent level of finish.

    1. I would want r/c
    2. I would want powder room
    3. no issue
    4. no major issue pending what the builder is using
     
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  20. Lara Lansell

    Lara Lansell Member

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    Thanks Dave - we did consider that early - two things prevented from us going "off the rack" on this one

    1. Volume builder designs are just "too big" - for instance, the smallest 2/3 bed; 1 car street-loaded terrace Rivergum offer as a Project Home are 146 / 187m2 respectively. Compare that to the designs they build in JV with Connekt for themselves at West Lakes Boulevard - 120 / 140m2 for 2 / 3 bed designs - 20% to 33% more GFA in the designs they offer as Rivergum "builders" compared to Rivergum as "developers"

    Looks great when comparing build costs on a headline $/m2 basis but, all else equal, for the same level of finish, a bigger GFA got to be more expensive than a more considered design with more suitable GFA. Cost aside, the 187m2 design would be pretty miserable from a solar access point of view - 10m 'deep' open plan off a single aspect with a 2.4m ceiling height....that wouldn't pass muster under the draft NSW Medium Density Housing Guidelines.

    2. To get three townhouses on a 607m2 site, and get them Torrens Titled against a 200m2 min allotment sizes leaves really, really, small room for wriggle on frontage width to take an off the rack design without material modification.

    Thanks Leo - spent some time to benchmark features / level of finish against 12+ on market townhouse developments in the local market (<3km at Campbelltown, Tranmere, Hectorville, Dernancourt). I think I've landed on the following trade-offs

    Features better than local benchmark
    - Torrens Title / Street Facing (v. Community Title / Shared Driveway)
    - Useable outdoor / rear yard area (80m2 >> 35m2 minimum)
    - Appliance brand
    - Roof windows / skylights

    Features worse than local benchmark
    - Back to back split v. ducted A/C on two of the dwellings
    - BIRs to two of the three beds on two of the dwellings
    - Reduction in tiling heights to the 'non-hero' bathroom walls
    - Painted solid core v. feature timber front door