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Risks and Rewards of Amalgamation

Huge demand for Gold Coast real estate makes it an ideal time for unit owners to band together to amalgamate property and attract developer attention.

Amalgamations aren’t quick and easy exercises, but there are big rewards for owners who get the details right – particularly given the insatiable appetite for new apartment projects in the city.

An amalgamation is where unit owners in a multi-unit block collectively agree to combine their properties to form a single lot and offer the holding as a development site or as multiple strata-titled units in one line.

Amalgamations have become more common on the Gold Coast where vacant development sites are lacking, particularly in central areas such as Broadbeach, Mermaid Beach and Surfers Paradise.

The popularity of amalgamations for unit owners comes down to the potential to sell for a higher price compared to individual market listings aimed at non-developer buyers.

This is especially true for beachside boutique complexes built in the 1970s and 1980s which are ideal high-density development sites. The older these complexes become, the more costly they become to maintain, which can provide further motivation for owners to sell.

Commercial agents Adam and Tony Grbcic, together with John and Nicole Mayer of Kollosche New Projects, have recently listed the El Dorado building in Broadbeach – an amalgamation of six units on a 654m2 block aimed at both developers and investors seeking a significant holding in this high-growth suburb.

Three Principles to Agree On

Before embarking on an amalgamation exercise, there are three main principles that unit owners should first agree on.

1

In Queensland, 100% of owners in a strata titled scheme must unanimously consent to a collective sale of their lots for an amalgamation to proceed.

2

Establish a floor price that is higher than what each owner could sell to non-developer buyers.

3

Owners must decide if they want to sell collectively on a price per entitlement, square metre basis or individually. If it’s the latter, owners must keep their negotiations with the developer confidential, otherwise they risk raising expectations among the group which could jeopardise the deal.

Owners should also beware of the pitfalls and have realistic expectations of developers.

The risk falls to the developer because they are the ones investing heavily in professional, consultant and development application fees, as well as initial deposits for owners.

Time is the other factor owners need to appreciate. Don’t expect an instant windfall or hefty deposit, however the rewards can be significant if owners are prepared to wait.

When developers enter a contract to buy a multi-title building, they are generally looking for a settlement period of between six and 18 months. That allows a developer time to unlock the potential value of the land by obtaining the development approval needed to be able to proceed with a project.

There are several factors currently at play which will influence the demand for amalgamated sites going forward, such as proposed town planning amendments which will potentially increase setbacks and reduce height in some areas.

Demand will inevitably fall when the market reaches its peak, however unit owners remain in a position where they can help to alleviate the unit supply shortage on the Gold Coast driven by local and interstate demand.

If you live in a low-rise building that requires significant capital expenditure in the next few years, this may be the right time to consider an amalgamation to capitalise on strong market demand.

Reach out to Kollosche Commercial for a confidential conversation around your goals.

Adam Grbcic 0404 087 772

Tony Grbcic 0407 968 667