Projects Review Edition 20, 2020
VCAT cracks down on commercial objections
Cobild's Four Strategies to Delivering Quality Projects on Time
2020 Vision
The Current Landscape of Builder Selection
Cladding and Other Headwinds
Welcome Home: Seamless Design, Connectivity and Integration Key Product Trends in 2020 Rent Shock: The Problem of Landlord, Tenant, and Lender
Cover Photo Arcade – 393 Burwood Road, Hawthorn
Contents 1
2
A Word From the Directors Spotlight
3 - 5
Current Projects
6 - 7
VCAT cracks down on commercial objections
8 - 9
2020 Vision
10 - 11
Cladding and Other Headwinds
12 - 13
Cobild's Four Strategies to Delivering Quality Projects on Time
14 - 15
The Current Landscape of Builder Selection
16 - 17
Welcome Home: Seamless Design, Connectivity and IntegrationKey Product Trends in 2020
18 - 23
Rent Shock: The Problem of Landlord, Tenant, and Lender
Projects
Past Projects
3
Hurstmon
24
3
Hazel Hawthorn
25
Balwyn Park Broadway Gardenia Park
4
Highmont
26
4
Custom
27
4
Contour
5
Rose & Bird
5
Timeless
5
The Beckworth
Boston
Contributors 6 - 7
VCAT cracks down on commercial objections - Arnold Bloch Leibler - Lawyers and Advisers
8 - 9
2020 Vision - SORA Interiors
10 - 11
Cladding and Other Headwinds - Pointon Partners
12 - 13
Cobild's Four Strategies to Delivering Quality Projects on Time - Cobild
14 - 15
The Current Landscape of Builder Selection - M2 Management Group Pty Ltd
16 - 17
Welcome Home: Seamless Design, Connectivity and IntegrationKey Product Trends in 2020 - Harvey Norman Commercial
18 - 23
Rent Shock: The Problem of Landlord, Tenant, and Lender - Secret Agent
+ 61 3 9822 9999 1111 High Street, Armadale VIC 3143
Disclaimer: Information provided is believed to be accurate as at the date of printing, no responsibility is taken for any errors or omissions. It is your responsibility to obtain independent, professional advice. Every effort is made to provide accurate and complete information in Marshall White’s (trading as Marshall White Projects) technical and regulatory newsletters. However, Marshall White cannot guarantee that there will be no errors. Marshall White and its contributors to the newsletter make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the contents of the newsletters and expressly disclaims liability for errors and omissions in the contents of this newsletters. Neither does Marshall White and its contributors to the newsletter assume any legal liability for any direct, indirect or any other loss or damage of any kind for the accuracy, completeness, or usefulness of any information, product, or process disclosed herein, and do not represent that the use of such information, product, or process would not infringe on privately owned rights.
A Word From the Directors We are cautiously embracing the new way of doing
Empty-nesters, who awoke from their slumber at
business and look forward to brighter months ahead
the start of the year, still want (or need) to make a
after dark and uncertain times.
downsizing move.
We’ve all been proactive with regards to
As on-site auctions return, the social proof of a
communicating with staff and suppliers, keeping our
successful auction shows them firsthand that there
team motivated and engaged. We’ve taken pre-
remains greater demand for residential homes than
emptive steps to ensure we have a business to come back to that is still fit for purpose. If you’ve done all this then you’re already a mile ahead of the competition.
is currently supplied. Investors who take a longterm view still want to choose an area of sustainable capital growth, then sit back and enjoy the ride when
In the absence of any real sport to report on, the media
the market undoubtedly reverts backs to a period of
is rife with predictions that life will never be the same
sustainable growth.
again. Whilst partly true, the underlying principles of what has made your business successful up till now hasn’t been lost on your target audience.
Looking back at the challenges of early 2019, we decided to focus on ‘controlling the controllable’. No individual or country can stop a pandemic spread
The last few months have highlighted our ability to leverage off technological advances and ensure our business remains both nimble and adaptable. Who would have thought our team members could function so effectively from home (or their local McDonalds)? In some cases, they’ve even managed to increase their output while away from the distractions of the office ‘water-cooler’ meeting.
in isolation. Whilst we can’t control the effects the pandemic have had on the economy in general, we can mitigate some of the repercussions It’s only putting in place corrective behavior that got us through the first half of 2019 to the greener pastures of the last six months of the same year. At the time did you have your “what if it hits the fan” list prepared and were too afraid to pull it out this month? We’ve learned to
Our builder clients have had much at risk: stockpiling
focus on the items that are under our influence, namely
construction materials places a strain on cash flow,
money in and money out.
developing alternative supply chains outside China takes time (if at all) and it’s obviously difficult to get a
Interestingly, almost without exception the new projects
sub-contractor to do their job off-site.
we’ve previously slated to commence mid-late 2020 are
From a demand point of view, our off-the-plan buyer inquiry is only slightly down (6%) when compared to the pre-covid months of February and March. We’re
intended to proceed as planned. Right now, sales are continuing at the same blended rate per sqm and days on market have been reducing.
thankfully back to fielding over 500 buyer inquiries
People still need a home, so you still need to provide
every week.
that willing buyer a townhome or apartment. And we all
First home buyers will lead us back to the glory days.
go on together.
They can still lock in a relatively inexpensive home loan and take advantage of the recently extended Government First Home Owner Grant.
Good selling, Mark and Leonard
Leonard Teplin Director
Mark Dayman Director
T: 03 9832 1191 M: 0402 431 657 leonard.teplin@marshallwhite.com.au
T: 03 9832 1193 M: 0409 342 462 mark.dayman@marshallwhite.com.au
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Spotlight
Kierra Hagedorn
Nicholas Boland
Madison Boland
Sales Executive
Sales Executive
Sales Administration
A driven and compassionate sales executive, Kierra has grown a stellar reputation for outstanding results and exceptional customer service. Kierra’s process-driven approach and excellent communication skills complement an innate attention to detail and genuine care for each person she encounters. A firm believer in spending as much time as necessary to gain a comprehensive understanding of what her clients seek in a new home, she is well-positioned to achieve tailored outcomes.
In only his second year selling off the plan developments, Nicholas sold in excess of 100 residences. Fast forward a couple of years, Nicholas won the award for top sales agent with the highest gross commission. Always a high achiever, Nicholas has an innate ability to see very early the potential of a proposed development and to persuasively convey that potential to investors and homebuyers alike. An impressive communicator with a wide spectrum of interests, he is easily able to find a common connection with every client.
A background in Events Management has equipped Madison with the flexibility, efficiency and organizational skills required in her Sales Administration role with Marshall White Projects. A thorough professional in every aspect, she is also refreshingly approachable and an effective communicator.
Kierra relishes the opportunity to forge strong relationships and connections with clients and colleagues alike. Having spent several years of her career as an integral part of Australia’s top performing real estate team helping with over 800 sales and settlements, Kierra has an enviable depth of knowledge of the real estate industry. Kierra has an appreciation for property, architecture and the ability to change someone’s life that her chosen career entails. Kierra is an empathetic individual and an active contributor to the Marshall White Foundation charity committee. Outside work, Kierra embraces every available opportunity to travel abroad and engage with different cultures.
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Having bought off the plan himself, he fully comprehends the logistics involved in purchasing a property yet to be built. With every individual project he immerses himself thoroughly to make sure he is acquainted with every detail of the build and finish. He is proactive in identifying any problems and then implementing a strategy to provide a solution. The owner of a gym in Camberwell, it is safe to say that Nicholas is a fitness fanatic. A former high-level rugby player, he trains at least 5 times a week and enjoys following a wide range of sports from rugby to cricket, basketball and boxing. Married to Justine, who is also in the real estate, industry, they can often be spotted walking their miniature dachshund Rufus around the local streets.
An indispensible team member, Madison has an innate ability to build an essential level of trust with her clients as she helps navigate them through the purchase of their off-the-plan property. Patient, diligent and respectful, she undertakes every task from preparing & processing contracts to dealing with variation requests and marketing issues with a consistently positive attitude and obvious empathy for her clients. With an appreciation of Melbourne’s food scene, laneway culture, leafy suburbs and beaches, she loves experiencing her surrounds with her family and friends. She also enjoys pilates, keeping fit and planning her next travel experience.
Project
Hurstmon 1 - 5 Hurstmon Street, Malvern East
Project
Hazel Hawthorn 368 Auburn Road, Hawthorn
3
Project
Project
Highmont
Custom
3 James Street, Bayswater
18 Station Street, Highett
Project
Contour 252 Wattletree Road, Malvern
4
Project
Project
Rose & Bird
Timeless
14 Adori Place , Maribyrnong
555 Burke Road, Hawthorn East
Project
Boston 16 Boston Road, Balwyn
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VCAT cracks down on commercial objections This article was written by Andrea Towson, Principal Lawyer, DWF – Real Estate (Planning & Development) Email - andrea.towson@dwf.law Phone - +61 3 9657 3540 DWF's Real Estate team takes a 'whole of project' to real estate developments – providing advice across all areas of property, planning and contstruction. This consolidated approach allows us to partner with our developer clients and their project team, adding value and acting as trusted advisors for the entire project lifecycle.
What happened in Axicom? Axicom Pty Ltd was the sole objector and applicant to review a Council decision to grant permit to Stilmark for a telecommunications facility in the Melton industrial estate. Axicom is a commercial competitor to Stilmark, and operates an existing facility about 180 m away from Stilmark's proposed facility. Vodafone proposes to transfer its facilities from the Axicom facility to the Stilmark facility. Axicom's application for review raised five grounds of review – only one of which raised potential issues of planning merit, namely: The Proposed Facility is not supported by local or state planning policy or the provisions of the Melton Planning Scheme, including the Code of Practice Telecommunications Facilities in Victoria (Code
Good or bad – the planning permit application process in Victoria is deliberately public and objector rights are a central feature of the planning system.
of Practice)… An objective assessment of this ground of review, found that the objection was devoid of planning merit, unsustainable and bound to fail. Axicom also elected not to file any expert planning evidence in
In this policy context, VCAT has been very cautious to dismiss or strike out third party applications for review in the planning and environment list.
support of its application for review.
However, this traditionally cautious approach may be changing; at least in respect of commercial objections filed by corporate objectors.
an objection to the proposal – provided that the objection has a
What does Axicom mean for developers and real estate investors? Simply because an adjoining land owner has a commercial interest in a proposed development, does not prohibit the owner from lodging sound planning basis. For example, a rival shopping centre operator clearly has a commercial interest in the development of a new full-line supermarket in the same catchment area. Any objection lodged cannot simply be to secure a commercial advantage (i.e. preventing
In the recent case of Axicom Pty Ltd v Melton CC (Red Dot) [2020] VCAT 190 (Axicom), VCAT summarily dismissed an objection application for review, on the basis that the application was devoid of planning merit and was solely intended to maintain a commercial objection. Axicom serves as an important reminder to developers and real estate investors that third party objector appeals must have a sound planning law basis, preferably supported by expert evidence.
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DWF - a global legal business
an existing supermarket tenant from relocating to the new shopping centre). The objection must be based on sound planning grounds (i.e. the planning impacts of developing an 'out of activity centre' supermarket, or urban design concerns with the supermarket layout). The grounds of review must be properly particularised, responding to the facts at hand (i.e. the specific design / built form proposed) and addressing specific planning concerns an objector has about the proposed development.
For an objector who is a commercial competitor, it is not sufficient
If an application for review is filed in VCAT, solely to maintain
to lodge a 'token' application for review in VCAT using generic,
a commercial objection, you risk:
non-specific planning language, when there is absolutely no substance to these objections. Before lodging an application for review, you should seek independent advice from an appropriately qualified and experienced town planner, seeking their views on:
• your application being summarily dismissed by VCAT – on the basis that it is vexatious and lacks substance; and • a potential costs claim by the permit applicant to recover its legal costs in connection with your VCAT application (including the cost of appearing at a contested dismissal application).
• the planning merit of the proposed development; • the strength of your grounds of objection; and • whether the planning expert is willing to appear as an independent expert on your behalf, in the event of a contested hearing.
DWF - a global legal business
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2020 Vision The new decade, 2020, has the ring of the future in its four syllables. As technology dashes ever further into digital and virtual spaces, authentic connection, materials and experiences are being sought. We are seeing interior design respond to this increasing need for tranquillity, flexibility and individuality.
Written by Varia Karipoff with Chantelle Balliro, Emma Alessi and Chivonne Hollis SORA Interiors +61 3 9417 1944 www.sorainteriors.com.au
It is no accident that a serene, neutral green – Tranquil Dawn – was chosen as the Dulux colour of the year for 2020. Pantone sided with Classic Blue this year, a shade that wouldn’t be out of place on a piece of antique china or a contemporary piece of statement furniture. Pantone stated that this blue was selected for its “timeless and enduring” qualities. These colours, which represent peace and stability, respectively – seem less like trends than universal aspirations. What this suggests is that trends run deeper than mere seasonal must-haves, instead, they are outward displays of shifts in culture and desire.
Site context and exterior architecture are logically the starting point to our design approach. In recent years, we have welcomed better apartment design which has led to changes in liveability in multiresidential developments. Changes have also been driven by buyers and owners who are ever more knowledgeable when it comes to design – they’re looking for well-designed and detailed spaces to call home. Luxury is also in demand. Apartment buildings have come of age, with a focus on hotel-like amenities such as cinemas, formal dining spaces, lounges, games rooms, gyms and pools. Co-working spaces, concierges and click and collect facilities are becoming more commonplace as work spaces and living spaces coalesce. And why not have support for all those life admin tasks?
Seeking the latest advancement is inescapable in any design field, particularly when it comes to cutting-edge materials, products and details. In interior architecture and design, staying on top of the trend game is instrumental in growing our creative process and achieving different aesthetics and outcomes. SORA Interiors, (the name is derived from the Latin word for sister) forged its own identity in 2018 while remaining firmly within the fold of the 80-strong team at CHT Architects. For the team, trends are helpful cues and often inform design outcomes, though these are interpreted in our designs in a way that stand the test of time.
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SORA Interiors
Apartment buildings have come of age, with a focus on hotel-like amenities such as cinemas, formal dining spaces, lounges, games rooms, gyms and pools. Co-working spaces, concierges and click and collect facilities are becoming more commonplace as work spaces and living spaces coalesce. And why not have support for all those life admin tasks? It’s not all work and no rest, however. Homes are essentially a place of respite and refuge from the daily hustle and bustle, and creating spaces that provide comfort and a sense of luxury for the everyday are the linchpins of our practice. Natural surfaces such as stone and timber, quality fixtures and bringing the outdoors inside are enduring tenets to our vision. Currently, there is in fact a strong case against trends – of the endless repetition of the same idea – instead, the focus has shifted to developing a signature personal style.
Whether you’re a minimalist or maximalist, or draw on highly crafted materials, interior architecture should function as a supportive canvas to add an individual mark and to customise your space. Awareness of sustainability and longevity are behind the push against disposable trends. Day to day, sustainability is at the forefront of our minds when specifying products and planning. With the careful arrangement of interior spaces, we are able to reduce the need for artificial heating and cooling and we propose the use of solar energy and skylights where feasible. These are all ways that interior planning can futureproof your home or investment, and that will never go out style.
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Cladding and Other Headwinds In the past several years, most capital cities in Australia have experienced unprecedented levels of demand for inner-city residential developments. The construction of buildings to meet that demand has in some instances been beset by serious problems. Andrew Kaspen
Pointon Partners
p: +61 3 9614 7707 pointonpartners.com.au
In the past several years, most capital cities in Australia have experienced unprecedented levels of demand for inner-city residential developments. The construction of buildings to meet that demand has in some instances been beset by serious problems.
of 25%, and the fire engineer in the amount of 39%, leaving 3% of the liability with the builder (owing to the fact that the occupant whose cigarette had started the fire had not been joined to the proceeding).
In November 2014, the Lacrosse Apartment Tower in LaTrobe Street, Docklands, caught fire when an occupant of a level 8 apartment left a cigarette butt in a plastic food container on a wooden tabletop on a balcony. The fire spread quickly, and by the time the first fire crew had arrived, the flames were travelling rapidly up the external wall cladding and spreading onto the balcony at each level. Fortunately, within a short time, the fire crews had evacuated approximately 400 occupants from the building without injury and brought the
In late July 2019, owners of the Opal Tower launched a class action in the New South Wales Supreme Court against the Sydney Olympic Park Authority, a New South Wales State Government owned entity and the owner of the land on which the Opal Tower is situated, claiming breach of warranty and a failure to construct the building with due care and skill. The claim is still pending.
fire under control, though it ultimately caused several million dollars worth of damage. In 2017 at the Grenfell Tower in London, 72 people died after becoming trapped during a fire in a multi-storey apartment complex overlaid in combustible cladding. In December 2018, residents at the Opal Tower in Homebush reported loud banging noises, exposed panelling and large cracks affecting six of its thirty-four above ground levels. All 3,000 residents were evacuated and relocated to alternative accommodation. In February 2019, a fire occurred at the Neo200 building in Spencer Street, Melbourne. Again, the fire is believed to been caused by a cigarette butt and spread vertically via the aluminium composite panel (ACP) cladding. Some 371 apartments were evacuated. And in June 2019, the Mascot Tower building near Sydney airport was completely evacuated after cracks were found in one of the major supporting beams. The number buildings affected by the cladding issue alone is, according to recent audits, well into the hundreds in each of Victoria and New South Wales. In addition, the Opal and Mascot Towers have raised concerns of a similar but different nature, that of structural integrity. There are fears these two towers are not the only buildings in Sydney affected by such problems. These events have already given rise to some substantial claims in the Courts and Tribunals. The Lacrosse matter was the subject of litigation through the Victorian Civil and Administrative Tribunal, and in its decision handed down on 28 February 2019, the Tribunal found the builder liable to the owners in the amount of in excess of $5.7 million (with a substantial proportion of other claims being left for determination at a later date), and ordered an apportionment of the loss under the concurrent wrongdoer provisions in the Wrongs Act against the building surveyor in the amount of 33%, the architect in the amount
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Pointon Partners
And on 15 November 2019, the Civil and Administrative Tribunal of New South Wales ruled that biowood attachments installed on the façade of an apartment building in the Sydney suburb of Ryde be removed due to their combustible nature, the risk of fire which they posed, and their non-compliance with the Building Code of Australia and the Australian Standards. Biowood has been used extensively as a form of wood panelling for its aesthetic value and sustainability in Australia and elsewhere. So what have been some of the government responses to these events? It’s fair to say volumes of literature have been written on this subject to date both within the media, and the public and private sectors. At a broad level, in July 2017, the Victorian Government established the Victorian Cladding Task Force to investigate the extent of noncompliant external wall cladding on buildings across the state, and to make recommendations to protect the public, restore confidence, and ultimately, to bring about fundamental cultural change within the industry. The Task Force delivered an interim report in December 2017, and has since then provided strategic direction and oversight of the government’s response to that report. In its final report dated July 2019, the Task Force made 37 recommendations. Some of those measures involved funding rectification costs and implementing a process to seek recovery of costs of rectification from responsible parties. These measures have been incorporated into the Building Amendment Cladding Rectification Act 2019 (Vic), which received royal assent on 19 November 2019, but at the time of writing has not yet come into force. The Act establishes the Victorian Building Authority Fund, and provides that if the VBA pays an amount to an owner by way of financial assistance in relation to cladding rectification work, the Crown subrogates all of the rights and remedies of the payee against a person in relation to the installation or use of any non-compliant or non-conforming external wall cladding product or other building work that required the cladding rectification work to be undertaken.
The Government will therefore effectively stand in the shoes of an owner and be able to pursue those responsible for the installation of the cladding and any loss occasioned by its removal and rectification work. The potential defendants of such claims will include officers of any relevant corporation in their personal capacity. This may therefore alleviate the need for owners to pursue their rights and remedies themselves through the notoriously complex and expensive process of large-scale litigation, sometimes against well-resourced opponents. Owners can, with government assistance, sidestep this process and get on with their more immediate concerns, that of rectification. At a more grass roots level, the Victorian Government also has established Cladding Safety Victoria to provide support and guidance to building owners and occupants of buildings with combustible cladding. These measures will be funded in part by a cladding rectification levy, to apply from 1 January 2020. The levy will apply to certain building work in metropolitan areas with a cost of at least $800,000. The levy will not apply to stand-alone houses or other class 1 buildings. Across the Murray, regulators are proposing to implement a package of measures including the granting of broad powers to the New South Wales Building Commissioner to prevent crises like those of the Opal and Mascot Towers and the construction of unsound buildings. The reforms will establish a ranking system for builders, developers and certifiers based on their workplace safety record, the age and financial credibility of their business and many other measures. Those measures will be absorbed into single figure which rates them,
Pointon Partners
and those with lower ratings may be placed under the microscope for more stringent examination of their work. Practitioners’ track records will therefore be influential in determining their participation in industry. A database has been proposed to facilitate speedy access to construction plans in the event of an emergency such as those which befell Opal and Mascot. Further, the Building Commissioner will be able to veto the granting of an occupation certificate of new projects, thus preventing settlement with buyers and forcing a possible return of their deposits, if those projects appear to be affected by structural integrity or contractor-related issues. The social, political, insurance and economic impacts of these events have to date been far-reaching. Residents of some of the above buildings have been faced with potentially huge levies for rectification which have placed untold pressure on some families and their finances. Insurance premiums have in some instances skyrocketed and placed in jeopardy the business viability of certifiers and other related sectors of industry. The full extent of these issues and the responses will take a significant amount of time to unfold. We will only be able to tell whether the Task Force has achieved its long-term objective of fundamental cultural change in the years to come.
Andrew Kaspen is a Principal with Pointon Partners in the Disputes Team. Andrew hosts the Building and Property Law Podcasts by Pointon Partners. They are available at: https://pointonpartners.com.au/podcast/
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Cobild's Four Strategies to Delivering Quality Projects on Time A happy client means ensuring a project is delivered on time! There is a distinct correlation between program, procurement and workmanship. The magic happens when a client sees that everyone involved is working together collaboratively to provide the best possible outcome – on time, within budget and to the highest of quality. Rotem Rotenberg - Director
P: 03 9827 1217
www.cobild.com.au
D E LIVE R O N TI M E
4. Authority are a law upon themselves
A project MUST start on time, driving the early trades; basement, structure and services, so that all the energy can be focused on delivering the high-quality finishes at the back end of the project. You can never win back time at the finishing stage - 1 day lost during a project can ultimately lead to a week loss on program over the duration of the project. Time Management is key across these disciplines:
Accordingly, sign off and payment of applications, consents and offers are made early to mitigate a potential bottleneck at the end of the project when clients are most highly geared, and potentially hold up Statement of Compliance from Council. Make sure this is a key focus at the front end of a project.
1. Safety First: If you want to hit program, sites must be clean, presentable, and incident free. Any incidents that occur on site can have a real impact on the capacity to deliver on time. Ensure you have a safe site. 2. Design management & Early Contractor Involvement Ensure the builder is involved early to mitigate lost time and ensure that the correct construction methodology is documented from the beginning. This will prevent unnecessary redocumentation and additional costs and delays in commencement on site. 3. Your neighbours are savvy! Protection Works Notices (PWN) are critical as your neighbours are now more informed than ever, and understand the system and their entitlements. Traditionally, a 14-day approval cycle; now cost and time blow-outs are seen in this area, so being nice to your neighbours and early engagement pays off. Builders can’t start on site until they have a Building Permit, get PWNs resolved EARLY!
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Cobild
5. Program & Procurement: We see a huge correlation between procurement and delivery of programs on time. When contractors are procured, engaged and commence work as scheduled, the ability to impact program positively is greatly enhanced. 6. “Tomorrow isn’t good enough” Create a culture of “tomorrow isn’t good enough” i.e. maintain a focus with all parties from inception to completion that today is the only day that matters. 7. The Right Team – Experience, tenure and ‘care factor’ “The Standard you walk past is the Standard you accept” So having the right people brings success and quality to all projects. Having a good team all the way through the project helps meet expectations and drives success. 8. There’s No Such Thing as Overcommunication Over communicate: two week ‘look aheads’, RFIs, hitting milestones, trade numbers on site, safety discussions, tool box talks, PCGs, all breed a culture of open communications.
E M B E D Q UALIT Y CO NTRO L Quality is what every client wants, every purchaser expects, and so do we! 1. Set clear expectations – have the design detailed clearly on the documentation and outline how the project should be built to avoid errors, omissions, and document purchaser customisation. It is great practice to meet with the design team for a page turn before the project starts to clearly understand the key design and quality focused areas for the project and set the standard for the expectations for all stakeholders.
all part of, so understanding their needs and clearly documenting early ensures that there are no stuff ups at the back end of a project where the Contract of Sale Plans differ from the Marketing Plans, which differ tot the Construction Drawings. 2. Any changes or out of scope work can have a huge impact on the program. It’s vital to articulate and flag this early so that this can be managed and completed on site with future planning. Long lead time supply items can really impact program…so make your mind up early.
2. Sequence, sequence, sequence
E N S U R E TH E B U I LD E R DO E S N ’ T G O B RO K E
• Makes the job ‘flow’
Research is key. Know who you are going to bed with…
• Enables trades to get in and out as quickly as possible to allow the next trade to come in and complete their works. Note: focus here required to ensure trades are working in a manner that will mitigate damage to other areas of the works
1. Engage a competent and financially sound builder. Sometimes tender prices can be very attractive, this can be a false reality - a mirage. Research is critical to ensure your builder will have the financial capability and capacity to finish your project. We do the exact same due diligence with our subcontractors and suppliers to
• ‘Hold Points’ allow quality control measures; including inspections, drawing review, water tests, quality checklists etc, to ensure that works are to a high standard of quality and the next stage of works can progress. Please note that this should be occurring all the way through a project • Following this saves time at the back end of a project, as there is no unnecessary rectification works carried out
MANAG E VAR IATIO N S It happens, we all change our mind, especially when it comes to the building industry and building a client’s apartment, their home. Managing expectations around variations from the onset is critical, or this could push out both time and budget. 1. Purchaser Customisations are a huge part of all the projects…. we are now building people’s homes. A huge responsibility we are
Cobild
ensure that we can deliver projects on time and within budget, and they are still going to exist by the time the project ends! 2. Engage a competent Quantity Surveyor who will verify the investment you are making with the construction contract value. 3. Our secret sauce is that we have no external funding for the business…so its important to find that information out before engaging a builder. You want to ensure that like a marriage you put everything on the table When considering any project, the team, the client, the builder and the architect must all share the same passion and drive for success. One of Cobild’s values is “Relationships for Life”. This encapsulates our commitment to long-term, healthy and successful relationships with happy and loyal partners. Building should be fun! Keeping the above guidelines front of mind ahead for your next project should keep it that way!
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The Current Landscape of Builder Selection Project Management Daniel Sette - Director M2 Management Group
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P: 0400 235 830
www.m2mg.con.au
In the past 12 months we have seen significant changes to the
With all these recent changes in the last 12—18 months, we at M2
development industry. Living through a declining property market
Management Group have adapted our processes to ensure we are
throughout the first three quarters of 2019 with upside through Q4
continually advising our clients of the best course of action whilst
2019. Not only had we experienced the declining property market,
we are in uncertain times and everchanging environment, when
a Royal Commission was ordered at that time to which the findings
selecting a builder, tender processes and incorporating acceptable
had limited the borrowing capacity of purchasers while putting
value management strategies to meet the current financial
restrictions on development lending.
landscape.
That called for refinement in areas within the property industry.
The builder selection stage involves a range of procedures
This was largely around the financial capabilities of builders, their
to identify, evaluate potential builders and specialists for the
procurement strategies and potential for settlement risk coming into
construction of your project. This stage assumes that your project
the 2020 Development market. We now face a greater challenge
manager is engaged to provide the subsequent stage of tendering,
as an industry and a society, COVID 19. We as an industry need
comprehensive vetting review, awarding and value management
to continually adapt to the enforced changes to our working lives
whilst engaged in other aspects of delivery relevant project
whilst trying to deliver projects with contractual obligations.
management services.
M2 Management Group Pty Ltd
Every builder has strengths and weaknesses in their processes, value management -- capabilities, delivery team and delivery strategies of each relevant project. Whilst we also need to consider the procurement strategies that a builder adopts when assessing a project in this current landscape with restrictions on incoming goods, how that affects a projects program and contract value this is particularly important for projects that are underway during this challenging time.
P ROCE S S 2 - Early Contractor Involvement (ECI) The ECI process is where the client has a preferred builder or a builder whom they have worked with before, and can deliver the relevant project. This process allows the preferred builder to assist in the design development of the documentation whilst meeting strict guidelines set under the ECI Agreement, being target price, buildability, close out builder related pre start conditions etc.
Our builder selection process outlines the detailed costs as per our specified trade breakdown and the duration of the construction works, ensuring adequate time has been allowed for to deliver the project and the projects specific requirements.
We also prepare and close out contract negotiations whilst design development is being undertaken. There can be an upside to this method, by utilising the builder as a resource during the Design Development process, but can hinder you from the benefits through a competitive tender. Criteria to Assessing a Builder •
Current financial capacity
•
2 years previous financials
•
Work In Progress (WIP)
•
Suitability of the project. Can the builder perform the detail required for the project
•
Marketability of the builder for specific projects (High end projects have a specific builder criteria)
•
Past delivered Projects
•
Procurement Strategies
•
Tender Process
TE N D E R P ROCE S S There are 2 methods we undertake when tendering a project
P ROCE S S 1 - Competitive Tender The selection of your contractor (builder) via a competitive tender process provides you with an opportunity to acquire a commercially driven, -competitive cost for your project. We usually recommend that your project be tendered in order to achieve the most cost effective result for your project.
M2 Management Group Pty Ltd
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Welcome Home: Seamless Design, Connectivity and Integration Key Product Trends in 2020 Glenda Bailey - Director
Harvey Norman Commercial Victoria
PH: +61 3 8530 6300
harveynormancommercial.com.au
colourations. What we like about the range most, is its oven and seamless smart tech features that really do work to enhance the cooking experience. Let me elaborate. Innovation with motiondetecting sensors sees the MotionReact feature conveniently turn on oven lights and displays when approached. The FoodView feature allows real time images of food cooking to be sent to the user’s smartphone via the in-oven pyro proof camera. And as required, temperatures and cook times can be adjusted remotely. A handy feature indeed. Finally, TasteControl sees the oven door open automatically at the end of a cooking cycle, to stop overcooking and cool food before switching to a warming mode. It is safe to say these slick innovations tell us Miele is thinking long and hard about the user experience, and it’s giving them a clear point of difference in the market.
Instant Filtered Water on Demand
The concept of home is a multifaceted one. On one hand, a home serves as a sanctuary for rest and relaxation. On the other, a place of functionality, engaging entertainment and social interactions. These
With liveability, functionality and wellness being key design considerations for the developers, architects and designers we work with, the Zip HydroTap is a trending tapware product to watch in 2020. Available in six designs, configuration output options include instant boiling, chilled, sparkling or ambient (room temperature) filtered water. Convenient and stylish, this hydration system seamlessly integrates into any space as either a standalone tap with font, or can be added to hero an existing sink and tap setup. Available in ten distinct designs, it’s definitely one for the design savvy.
modes or ‘personalities’ require much thought into the design and build process. Yet consideration must also be given to selecting the right appliances, sanitary ware and tech to ensure the highest level
Seamless Integration Refrigeration
of liveability is achieved in a holistic way. These are the top five key
Since the humble inception of domestic home refrigeration in 1913, the focus for this staple appliance in 2020 is integration. When done well, integration between appliance and cabinetry seeks to achieve a seamless design line and deliver a sense of spaciousness. Brands like Miele, Liebherr, Gaggenau, ILVE, Bosch, Siemens and AEG are key players with integration. However, we’re continuously impressed with the product development and design of Fisher & Paykel in this category. Their latest integration refrigeration offering, referred to as next generation, is on our radar and should be on yours. From the Integrated Column, to the ActiveSmart™ Slide-in, and Cool Draw, what has us excited is the design freedom these units offer. The Column, able to be installed side by side or separately, is fully customisable for a flush fit design. The ActiveSmart™ Slidein refrigerator gives the illusion of integration, yet is a standalone fridge designed to sit flush into new or existing cabinetry with a
product trends you need to know about now. Cooking with Connectivity Gaining momentum in 2020, is the shift to include greater smart tech applications in cooking appliances to improve user experience. Market leader Miele is playing to this and their brand philosophy ‘Immer Besser’ Forever Better, when they recently launched the new Generation 7000 range. And it’s definitely wish list worthy. From ovens, steam appliances, built-in coffee machines, warming and vacuum sealing draws, to full surface induction cook tops, the impressive looking range comes in 4 signature design lines and colourations. What we like about the range most, is its oven and seamless smart tech features that really do work to enhance the cooking experience. Let me elaborate. Innovation with motion-
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minimal 4mm surrounding gap. Impressive, indeed. And finally, the CoolDrawer™, a convenient compact pull out refrigeration draw. Can be use singularly or as multiples side by side. We see applications for the CoolDrawer™ beyond the kitchen to include the home office and entertaining areas as well. This range from Fisher & Paykel is setting a new standard in refrigeration versatility and design flexibility. It’s more than just cool.
Wine Fridges What seemed a niche market in its infancy 8 years ago, resonating with only the most dedicated wine aficionado, in 2020 we’re seeing this product category as a go-to luxury mod-con that adds both value and the wow factor to the in-home experience. Designed to keep wines in optimum condition by maintaining precise temperature and humidity, these units also minimise vibrations and eliminate UV light. With plenty of wine fridge options available in the market, some of the best we’ve seen are from master brands like Liebherr, Vintec, Miele, Smeg and ILVE. Options range from walk-in cellars right down to compact 18 bottle capacity units. From standalone to under bench and integrated units, there is configuration flexibility to suit any space. Tech features like temperature alarm, door open alert, security lock and depending on the unit, separate temperature zoning capabilities, make a wine
together a home’s devices into a single ecosystem. Then controlled by app or voice, the home’s smart devices link to each other using a Z-Wave signal, forming a mesh network unique to each property. Actions like activating and deactivating lights, TVs, blinds can then be triggered through this system. The Virtual Voice Assistant feature is certainly nice to have, enabling reminders, timers and alarms to be set for things like calling friends, family or taking medications. An aspect that certainly grabs attention is the geofencing capabilities offered through the My Nero app. This allows the property’s gateway network to be notified when the resident is entering or leaving the virtual perimeter, activating programmed responses such as opening or closing the garage door. The smart automation options are endless, and do improve the in-home experience through intuitive functionality from the most basic system through to high level application. Overall, the key take away here is liveability. Enrich the environments you create with seamless integration and connectivity, and you’ll achieve an ease of living that’s intuitive and fun.
fridge a fantastic alternative to a traditional wine cellar. We’re particularly taken with Smeg’s Connect App Wine Cellar function, which allows for remote control of smart units along with other functions like sharing a wine list with friends through Facebook. Furthermore, inclusion of a sommelier’s draw in their Dolce Stil Novo range, ensures all the tools of the trade for serving, storing and recording favourite wines are conveniently available in one place. Regardless of the wine cellaring investment strategy, a wine fridge is certainly worth consideration.
Smart Home Automation A key tech trend for 2020, smart home automation is the ability to control devices within the home, creating an ecosystem awaiting command. From energy management, lighting and climate control, to automation, seamless functionality and control await at a push of a button (or spoken word as it may be). A highly experienced and trusted product we like for this is Nero Smart Home. Nero brings
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Rent Shock Vol.90 Apr 2020
Rent Shock: The Problem of Landlord, Tenant, and Lender by Paul Osborne
The Greek myth of Icarus is often remembered in times of crisis. To escape from prison, Icarus fashioned his wings with wax joints and flew away. Ignoring his father’s advice not to fly too close to the sun, the wax in Icarus’s wings melted and he fell from the sky into the sea, where he met his end.
Today many people and firms, like Icarus, have been flying too close to the sun. Unlike Icarus, many were not warned. The magnitude of the COVID-19 crisis brings the sun much closer for all parties — and very few have built contingency plans to deal with such an improbable event. COVID-19 is a crisis on many levels. It’s a health crisis as well as an economic crisis, which is also a health crisis. Tragically, lives will be lost through the economic impacts of the shutdown alone. While the equity market has experienced extreme volatility, the slow-moving property market is only starting to be tested. At a financial level, this looming crisis looks to be a crisis of rents, particularly within the commercial property sector. This paper has a narrow focus: to examine the impact of COVID-19 on commercial property. However, as detailed below, a shock in the commercial property market will have wide-reaching impacts on the rest of the economy. The government stimulus has been well publicised. It’s a broad and aggressive strategy: a blunt instrument used to get the majority of Australians over the hump of the next six months. Overall, the response has been positive from both employers and employees. What remains unresolved, are the uncertainties around both residential and commercial tenancies. The JobKeeper and JobSeeker programs will do a lot to assist the residential sector by allowing struggling tenants to meet their rental obligations. Commercial tenancies remain stranded. The recently released National Cabinet Mandatory Code Of Conduct for commercial tenancies, aims to share the burden between tenant and landlord. The objective of the code is to help partially relieve a business of their rental commitments based on their drop in turnover. A combination of rent abatement and rent deferral are built into a formula.
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Bourke Street Mall after Victoria's social distancing restrictions were implemented Source: Rachel Cary (sbs.com.au)
The code also prohibits landlords from evicting a tenant for the non-payment of rent, during the period of COVID-19 and subsequent recovery period; or draw upon the tenant’s security to make up missed rental payments, as well as a number of other measures. While the major banks have offered to defer interest repayments for caught-out landlords as long as they retain existing tenancies. Still, a key directive is to “sort it out” — that is for all parties to discuss how both the business, land owner, and bank can survive the downturn. The government, at present, has had great difficulty in resolving this situation; as time goes on, it may have no choice but to further intervene.
A dependent chain exists between landlord, tenant, and lender (often a major bank). Landlords borrow from a lender and need to pay principal and interest costs on a monthly basis; the landlord hopes to be able to pay down debt from the rent money received by the tenant. The tenant requires the premises from the landlord to operate the business and also requires the landlord to remain solvent, since a number of leases can be disclaimed should the landlord be forced into liquidation. The lenders often have borrowed funds themselves to help the landlord finance in the first place and have their own shareholders and creditors to worry about. This dependent chain is under much strain
throughout the economy and is unlikely to be bailed out with public funds; each link in the chain is squeezed and a solution may not be possible for many within it. Veteran landlords who carry little or no debt should be able to get through — but even a vacant building costs money: rates, taxes, utility charges, as well as repairs and improvements. Many landlords will take a hit. What makes this crisis remarkable is that almost all sectors are hit at the same time. Downturns in certain sectors are common: book stores or the homeware industry might fold at certain points; often new tenancies are granted to businesses that find a stronger product fit, or are simply better-run. Now everything has taken a hit at the same time and, except for supermarkets or medical services and other select businesses, the broad downturn will mean no ability for the tenant to operate and no alternative for the landlord to establish a new tenancy in their building — to generate cashflow. Commercial rents form a significant cost for businesses; they are generally long term commitments made by tenants and are fixed costs. They cannot be easily stood down like employees, or discounted like merchandise. As such the goal of most businesses is to survive this period of “hibernation” — rents, particularly in sectors where the percentage of such costs take up a significant amount of the business overheads, are perhaps the difference between survival or receivership. RENT SHOCK
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A pandemic brings into play social practices which are antithetical to how most commercial properties function. While people will spend more time at home, thereby making residential security invaluable; rules on social distancing, shopping for essentials only, and the mandatory closure of many businesses will make much commercial property redundant, even as underlying commitments and obligations remain. With health professionals tipping at least 18 months before a vaccine arrives on the scene (if at all), we are likely to be living in a period of intermittent opening and closing for an extended time. This is likely to have profound impacts for commercial tenancies moving forward. — ECOSYSTEMS WILL BE BROKEN, BIG AND SMALL Most properties are not siloed off from one another; to mix metaphors, properties’ relations to other properties looks more like the interdependence of a coral reef. Various businesses form clusters and are much more reliant on neighbouring businesses and the surrounding supply chain than many might think. The in-vogue bakery helps form a cluster of other businesses around it such as the greengrocer and fishmonger, all rising and falling depending on the health of these various operations. Industrial property is clustered with interdependent firms who manufacture commodities requiring closeness to ports, trucking companies, and air-freight. Offices are highly clustered too, technology businesses are a prime example; an area like Cremorne is dense with tech companies, which makes it dependent on other nearby technology businesses. The value of the leases from both tenant and landlord is highly dependent on the surrounding combination of properties, services, and other businesses, as is the individual shop or office at hand.
The local butcher and greengrocer has been on the nose for some time, as many flocked to large discount stores to source their produce and other goods. Times such as this reinforce the need for good relations with your local food supplier, and provide an example of perhaps the type of business that may emerge better off, after all is said and done. A resurgence in Australian manufacturing to escape our reliance on international markets will be encouraged and likely a boom will come — it’s just a question of when.
On the other hand, highly clustered retail areas, many of which were already on the brink, may see this moment as the final nail in the coffin. These ecosystems will be highly disrupted. Something new will need to emerge to take their place. The hibernation strategy may be the correct policy for the health of all citizens. However businesses are like sharks: their survival depends on a continual movement forwards.
In a normal down-cycle you may find that a few companies go out of business and close down. Often these are replaced by newer firms and the ecosystem, while still affected, is refreshed and can continue to function.
Due to the nature of the COVID-19 impact across pretty much all sectors, entire ecosystems are under threat and many will all go out of business simultaneously. This is challenging for any recovery. There will be a silver lining; consumers may start valuing their own local supply chain a little more.
An empty car park at Chermside shopping centre in Brisbane's north. Source: ABC News, Chris Gillette
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— SETTING THE VALUE OF COMMERCIAL PROPERTY; A LOOMING CRUNCH IN VALUATIONS FOR LANDLORDS Price discovery is extremely difficult for real estate: it’s seldom traded and no two buildings are exactly alike. The literature on price falls to commercial property after a pandemic is sparse; we know that in Hong Kong, only small drops in end values occurred after SARS. Rents were hit hard in the short term, but building owners could hold on and wait for the virus to dissipate. As the current crisis is much bigger in its present and projected impact, the consequences will be much more acute. For many commercial properties the valuation is derived from rent total collected, which is often expressed as a passing yield. To put it in rather simplistic terms: a future investor may compare any potential property investment with the risk-free rate. The risk-free rate is generally accepted as a rate of interest, that can be expected for a mostly risk free investment, such as a government bond. A safe government bond is expected to be rather problem free and secure — although this proposition doesn’t look as safe as it has in the past. Say a government bond of the investor’s preferred time duration is returning 2%. An investor will seek a premium on this rate, should he or she pursue an investment that carries some risk, such as a property investment. Over the past few years, many investors have seen a 3% net yield as attractive, especially when the following applies: 1. 2. 3.
The tenant is deemed safe — such as a bank. The lease is long. The lease has inbuilt provisions such as annual rent increases that help push the total return higher, as the years accumulate.
Clearly, in the current environment, the gaps between risk-free investments and those that have traditionally been viewed as more risky, such as property investment, have become much too close for comfort. Therein lies the problem. High levels of leverage have been employed, for small improvements in the expected return, over risk-free investments. With almost no contingency built in for vacancy — and certainly not for a crisis on this scale — valuations are at risk of a sharp contraction.
Consider this example, on how the amount of rent collected can impact the value of the building from the standpoint of an investor:
Pre-crisis: — Net Income $180,000 as of 2018/2019 — 2 year lease remaining plus further options for tenant / 4% annual increases — Investor confident that the tenant will stay further terms — A-grade tenant based in the retail sector — Investor willing to accept a 3% net yield
= Investor willing to pay $6m Post-crisis: — Tenant folds and new lease struck at a reduced rate of $126,000 a reduction of 30% — 5 year lease commitment plus further terms for tenant / CPI increase — Investor now seeking a 5% net yield to be well clear of the risk-free rate and for contingency
= Investor willing to pay $2.52m for the same building This example is a simplistic model and there are always other costs and factors at play. You can see that you don’t need to tweak many of the variables for a building’s value to distort wildly.
Even leases that haven’t been disrupted by the crisis will still have future investors worried as to what “market rent” will look like once current lease terms begin to expire. Will a future investor see a lease with a present stable business (supermarket, etc,.) as safe, or will they be concerned about rental alternatives for these stable businesses if the rent isn’t dropped at the end of the existing term? Clearly there are landlords who have been sailing in calmer waters and are in a much better position to weather the current storm. The issue for banks is the late cohort of investors who have taken skinny returns and are highly leveraged. Owner-occupiers who have bought premises
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for their own businesses are highly impacted too, however they are still able to operate in the premises. It will be more about the strength of their business and whether they rely on surrounding businesses to flourish. — A PROBLEM FOR BANKS; BUT ALSO FOR MANY PRIVATES AND FUND MANAGERS TOO The major banks have increased their commercial lending business over the last few years. Commercial property exposure (for banks) is highest in the office and retail sectors of the commercial property market. Industrial, land development, and other sectors make up a much smaller part of the overall composition of lending. The impairment rate is low at just 0.2% (APRA) — this figure is expected to rise sharply. It will put increased pressure on the banks in the near future. As the impaired assets under each lender begins to rise, personal guarantees and security for both tenants and landlords could also see the residential market come under pressure too. It is well documented that the largest exposure for banks is in the residential sector. It would not be an exaggeration to say that a problem in the residential housing market would be catastrophic for the entire economy as a whole. Many commercial properties are funded by privates and fund managers too; pressure will likely mount on such outfits as commercial tenants struggle to get back to business as usual. — ON THE OTHER SIDE Any bounce back will have vastly different outcomes for the various eco-systems and different geographies. The CBD has experienced a huge run up in prices in recent times and will likely be hit hard, but commercial centres have been hit by plagues and natural disasters for millennia. CBD areas are likely to experience a sharp contraction but also a sharp rebound. During the SARS epidemic, Hong Kong Class A office rents experienced a remarkable 23.66% drop in a 12-month period before rebounding sharply (Chesterton Petty, 2004). This would be a good outcome in today's environment, considering that all super cities are impacted simultaneously; these global hubs are unlikely to get back to easy trading as their international counterparts are hard hit too. Considering the current shock, a sharp contraction in rents is likely. It’s unlikely that the current virtual world of Zoom meetings and the best of digital apps will make the office redundant. Face to face interaction is still the trusted method of doing business and it’s been that way for many millennia. It is direct and has no external broker; companies like Zoom still extract
rent for usage; data is still a required payment made by all participants.
In fact, after the virus recedes, the importance of face-to-face contact may accelerate as people tire of video conferencing and realise its limitations. Transmission is somehow lost despite all the ways technology tries to bridge the gap. In Silicon Valley and the Bay Area in San Francisco, the most advanced tech centres, people still sit in offices next door to each other and they still meet over coffee. New property projects, which increase supply, will most likely be shelved for the foreseeable future. Eventually, this means that at some point on the horizon, rents will increase as the lag creates a shortage of supply. Whether this will be a few years or a decade away, nobody knows for sure. Suburban shopping strips may take a lot longer to recover as they were already struggling to begin with. Hotels, restaurants and cafés, as well as properties which have directed themselves to short stays and relied on platforms such as Airbnb are likely to be most savaged by the virus hangover. The CBDs of both Melbourne and Sydney could be very hard hit — but they’re also more robust to bouncing back. The concern will be the suburban strips, which have already been in structural decline. This could be much more of an L-shaped recovery with a protracted downturn and little improvement for a long time to come. Rents in the hospitality space are likely to fall back sharply; as are hotel and accomodation offerings, as travel looks to be off the cards for a number of years. — A RETURN TO BUILDING IN CONTINGENCY; A MARGIN OF SAFETY The aversion to “flying too close to the sun” by both landlord and tenant are likely to loom large after the crisis has passed. Memory takes some time to dissolve itself and caution will be the likely order of the day. For landlords this means selecting strongly capitalised tenants with solid business plans, restricting many tenants from the best locations. There will also perhaps be less emphasis on extracting rents, since a robust tenant beats a poor-paying one any day. For tenants, this means budgeting for a potential downturn and loss of trade and careful building of provisions within their leases, for when unexpected shocks occur. Future investors will look to factor in contingency on their investment RENT SHOCK
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calculations, which might mean reduced sale-prices for many commercial asset holders.
Landlords face a very uncertain future when it comes to estimating potential incomes from their buildings. There will be opportunity though: new tenancies are likely to emerge, at perhaps fairer rents and with much more robust business models. It is worth mentioning the role of central banks and the dilemma they have created through their policies of ultra-low rates. It’s pushed investors out to make riskier and riskier investment decisions in the search for income; little margin for error and pushing for extreme rents have been the side effects. What started out as an acute health problem has become so much more. A crisis in rents has emerged within the commercial property market. Not since World War 2 have Australian businesses been so swiftly impacted. The future is largely unpredictable and we have no idea how things will play out. What we should be concerned about is the state of commercial leases at present and the current impasse. — CONCLUSION This country has done a great job so far to“flatten the curve” when compared to other nations. The public discourse has started to shift from that of severe doom, to when we might be able to loosen restrictions, and allow many to restart their businesses. However countries like Singapore, who have been held up as the model for dealing with COVID-19, have started to see a resurgence of the virus. COVID-19 will loom as a threat hard to eradicate completely and we are likely to be living with the virus for a while longer. How this impacts businesses remains to be seen, yet further disruption is inevitable. For commercial property, the pain is likely to be deep for all parties involved – with no easy solutions. Whether this rent shock troubles the wider economy or not, only time will tell. The damage could be profound if it does.
Rent Shock Vol.90 Apr 2020 Words by Paul Osborne Cover Image by Sheng Yi Lee © 2020 Secret Agent HQ Pty Ltd. All rights reserved. No reproduction, distribution or transmission is permitted without the prior written permission of Secret Agent HQ Pty Ltd.
info@secretagent.com.au (+61) 3 9349 4333
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Developers Appointing an OC Manager Bryan Phillips
Director
Tideways
bryan@tideways.com.au
At an Annual General Meeting the OC will approve a budget and set levies for members to pay to meet these financial requirements over the year. Owners are required to pay their share based on their lot liability. Owners Corporation Managers are appointed to manage the common property of the owners corporation, as detailed in the Plan of Subdivision, as directed by the owners corporation committee. So, what happens when a property is under construction and there are no owners? It is important that the developer engages an Owners Corporation Manager early to consult on all future owners corporation matters to ensure the building is well considered, not just from an external aesthetic perspective but from an internal liveability/practicality perspective.
An owners corporation is automatically created when a plan of subdivision containing common property is registered at Land Use Victoria. Land Use Victoria registers and records owners corporation applications received either with a plan of subdivision, or lodged following registration of the plan of subdivision.
When a building is under construction, the developer, builder and design team typically view the project from their own perspectives, ensuring the building is compliant with building code, is built to plan and services the needs of those who invest in it. An OC Manger will view the project differently, from the inside out. They are the experts when it comes to understanding strata legislation and strata living so can provide a different perspective during the construction phase. How will cleaners access common areas, are their power points in
If this is a new development the Owners Corporation (OC) will eventually consist of all the owners who have purchased a lot within a Plan of Subdivision. Owners will have shared ownership of
the hallways, is there a bin wash-down area, is there inclusion of facilities for the disabled, is there sufficient lighting in the garage, are the common area tiles sealed etc?
the property’s common areas (such as driveways and footpaths),
amenities (such as a gym or pool), assets (such as lifts and garage
An OC Manager has a true understanding of the anomalies of living
doors) and services. As a group they are required to ensure the
in strata. It is better to have people living harmoniously in a building
property stays in good condition, with adequate services (such as
from the start than having disagreements about features which do
cleaning, waste management, gardening etc), maintenance of assets,
not support community living.
insurance, and funds for unexpected expenses over a year.
A good OC Manager will also be very stringent when it comes to inaugural budgets. Their goal is to balance the needs of owners with
those of the developers when they are in the sales phase. A well-
considered budget should enable the sales team to have meaningful
conversations with prospective purchasers around what the levies
will be, making it clear and transparent to owners what their levies are paying for and how this may evolve over the years. A professional OC Manager will also have full understanding of lot entitlements and ensure each owner is contributing fairly based on what common areas or facilities they use or have access to. It is not uncommon for OC Managers to work in conjunction with the surveyors in formulating the number of owners corporations within a project or the apportionment of liabilities based on services used.
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Arnold Bloch Leibler - Lawyers and Advisers
At Tideways we have been working closely with our developer
A good OC Manager will have full understanding of these
clients well before practical completion of projects to ensure all
agreements and represent the best interests of the owners.
relevant amenities, facilities and services to lot owners are planned and stress tested before occupation. Doing so has enabled us to balance the interests of the new owners as well as protecting the brand integrity of the developer. If an OC Manager is involved during construction phase, they will also create relationships with sub-contractors and have a full understanding of warranty periods and obligations postconstruction.
Having an OC Manager appointed during construction phase will ensure a smooth transition for owners as they buy into the development, ensure tenants live harmoniously within the community and guarantee the developer’s brand is represented positively post-construction. At Tideways we are proud to provide this thorough and transparent service to developers.
Many service contractors will include twelve months servicing as part of their installation, and this should be excluded as an expense in budgets for the OC while the warranty is current.
Arnold Bloch Leibler - Lawyers and Advisers
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Past Project Profile
The Beckworth 184 Tooronga Road, Glen Iris
Price Range $815.0000 - $1,650,000
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Apartment Type
No.
% of Total
Average Size per m2
Average Price per m2
Average Price
2 Bed, 2 Bath
2
11
77.0
$10,716
$824,250
3 Bed, 2 Bath
16
89
123.8
$11,107
$1,377,750
Past Project Profile
Balwyn Park 7 Cherry Road, Balwyn
Apartment Type
No.
% of Total
Average Size per m2
Average Price per m2
Average Price
3 Bed, 2 Bath
6
50
143.0
$13,306
$1,916,667
3 Bed, 2 Bath + Study
6
50
148.0
$14,068
$2,080,000
Price Range $1,500,000 - $4,130,000
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Past Project Profile
Broadway 630 Glen Huntly Road, Caulfield South
Price Range $450,000 - $1,075,000
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Apartment Type
No.
% of Total
Average Size per m2
Average Price per m2
Average Price
1 Bed, 1 Bath
1
9
59.0
$7,627
$450,000
2 Bed, 1 Bath
2
18
70.0
$8,947
$627,500
2 Bed, 2 Bath
6
55
80.0
$8,456
$676,667
3 Bed, 2 Bath
2
18
114.0
$8,624
$985,000
Past Project Profile
Gardenia Park 1 Iris Crescent & 8 Genista Avenue, Boronia
Price Range $485,000 - $669,500
Apartment Type
No.
% of Total
Average Size per m2
Average Price per m2
Average Price
2 Bed, 2 Bath
9
64
107.1
$4,899
$525,000
2 Bed, 2 Bath + PR
1
7
132.0
$4,962
$655,000
2 Bed, 2 Bath + Flexi
1
7
135.0
$4,959
$669,500
2 Bed, 2 Bath + PR & Flexi
2
15
125.0
$5,036
$629,500
2 Bed, 2 Bath
1
7
128.0
$5,059
$647,500
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Celebrating over 1 4 0 Successful Sell Outs Since the inception of Marshall White Projects in 2013 we’ve attempted to provide a insight into the ever changing world of property development by sharing the hard earnt lessons of those in the field and generous enough to share their experiences for the betterment of their peers. Marshall White Projects has evolved as a team, maturing in a market where buyers learn to expect more than ever before whilst developers must work harder to achieve the same results. They say knowledge is power, so we invite you to click on the button below and enjoy the resource of our first publication through to today.
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+61 3 9832 1191 1111 HIGH STREET, ARMADALE VIC 3143