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Where is ALZ's development relative to the competition?

Aussie Developers will feel pinch: Macquarie
THE AUSTRALIAN SEPTEMBER 26, 2014 12:00AM

Kylar Loussikian

Journalist
Sydney
MOVES to curb lending to property investors would “clearly be detrimental” to listed home developers like Mirvac, Stockland and Lend Lease, according to Macquarie Securities analysts.

Shares in the three biggest listed residential developers fell after the release of the Reserve Bank’s financial stability review, in which it flagged talks with the Australian Prudential Regulatory Authority to explore “further steps that might be taken to reinforce sound lending practices”.

The broader market closed down 0.74 per cent on Wednesday, but Lend Lease dropped 2.14 per cent, Mirvac 1.71 per cent and Stockland 1.25 per cent. Lend Lease and Stockland made up some of those losses yesterday, up 0.85 per cent and 0.76 per cent respectively, but Mirvac fell again, down 0.29 per cent.

The Macquarie analysis noted there was a market expectation of “elevated Australian residential earnings from these entities in the medium term”.

Of the three, Lend Lease is less exposed, as it has already pre-sold a significant proportion of its apartment developments, and will book the profits as they complete.

Measures to limit investor activity could also impact on non-residential real estate investment trusts including Dexus, Goodman Group and Cromwell Properties, companies that stand to benefit from the booming office-to-residential conversion market.

A JPMorgan note concurred with Macquarie, suggesting that while it wasn’t “an alarm bell”, talk of lending restrictions could cause investors to “question medium-term residential sales volumes and prices”.

But others questioned the probability of regulatory changes and the extent they could impact on demand for property, particularly with supply remaining below demand in metropolitan markets.

Winston Sammut, managing director at fund manager Folkestone Maxim Asset Management, said any impact was likely to be “minor” and he believed the RBA was trying to talk down the sector rather than bring in meaningful measures.

Mr Sammut said it was price growth in Sydney that was causing the most concern, and it would be difficult to bring in changes that would have a meaningful impact purely on that market.

“Mirvac released the next stage of Harold Park (in Sydney) and it pretty much all sold out in one day, and another development here on George Street, that sold out quickly too,” he said. “Based on revenue growth going forward, I don’t think there will be much of an impact on stocks like Mirvac, where their apartment developments are sought after.

“Stockland is different, all they do is buy land and subdivide it, so they are more exposed to the level of interest rates and affordability in terms of meeting the market for first home buyers,” he said.
Dear gurus...

1. Any idea how much of Australand's A$6bn (not sure if I am right) development properties have been sold?

2. Structure of property purchase in Australia - The Australian residential properties, can the buyer walk-off, lose the deposit and cancel the purchase?
For #1 you can easily call up the the sales people to gauge the success of the project. But for retail investors probably can only do random sampling... Haha

For #2, I'd think it's a yes. I've asked a FCL agent on the procedures and this is what I got.
1, pay a deposit of $5000 to secure the apartment.
2, we will express post contract to you for signing and you post back.
3, you would need to pay 10% deposit 14 days upon contract acceptance by developer. The $5000 can be part of the 10%.
4, nothing more to pay until settlement depends
5, you will earn interest from your deposit.
6, your appointed settlement agent and we will keep you updated about the progress of the construction at different stage
http://www.valuebuddies.com/thread-4380-...l#pid93676

(26-09-2014, 11:51 AM)Contrarian Wrote: [ -> ]Dear gurus...

1. Any idea how much of Australand's A$6bn (not sure if I am right) development properties have been sold?

2. Structure of property purchase in Australia - The Australian residential properties, can the buyer walk-off, lose the deposit and cancel the purchase?
http://www.valuebuddies.com/thread-4912-...l#pid95353

Towkay saw the foreigners coming and he is also one of the rich foreigners that came alongside other foreigners...

The difference here lies in his vision to make money off the foreigner driven demand.

As it is Australia is a big continent and to implement a blanket anti speculation measure will be futile. In addition if foreigners are coming with cash, then such measures will have little impact on them as well.

Analysts and doom sayers are being slowly proven wrong that an outright cash call by FCL is needed to reduce the gearing associated with ALZ purchase.

We have already seen FCL raising perpetual equity at an attractive 4.88% with Towkay putting in his own $. We can never rule out further dated debt funding that can attract even lower medium term funding costs.

In addition, the rumoured listing of ALZ's recurrent income assets such as investment properties will have good acceptance even post the recent global correction in REIT prices.

If Towkay successfully pulls off another feat in taking over UE, then FCL is likely to be the beneficiary as FCL continues to own 100% of REIT managers in FCT, F Comm and FHT (note that Towkay injected his private hotels - own 40% of FHT with FCL owning 22% of FHT and Towkay owns zero interests in FHT manager).

The funding and gearing concerns on FCL will be mitigated as new initiatives roll out over the horizon.

FCL is a remaking of Capitaland in the early 2000 just that FCL has substantially better and sustainable pipeline in well regulated and less risky operating environment than Capitaland.

Vested
Core Position
GG
I am interested in FCL, current its trading around the 1.70
what do u guys think of its fair value?
would it be as high as $2+?
It's currently trading at ~20% discount to book, which is pretty much in line with other developers.

They may spin this off or spin that off, but they may and can also sit around, do nothing for a long long time (with mediocre results). With nothing concrete, it's quite hard to gauge. Uncertainties in Aussie property market (changes to first time buyers, foreign investments etc etc.) isn't helping either. Meanwhile, short of any further developments, I'd think 1.7 is a reasonable price. Definitely beats investing directly into Aussie property with everyone on negative gearing!

Anyway since I need to average down significantly, plus the millions of share on 1.70 sell queue capping its upside, I'd say it's got a fair value of 1.5 ;p
Got to be ahead of the curve... u rely on analysts to convince you, I rather convince myself.

My angmo research head always tell me to make a view - right or wrong better than no views.

Something will happen and is happening... mkt has been slowly proven wrong on an outright cash call... kind of stupid really since he already own 87.9%, he will do well leveraging on Other People's Money which he has a good track record. Doing nothing in my opinion is a sin as otherwise he won't be out on the street looking to buy UE so quickly after finishing off ALZ.

There are no uncertainties in Australian property market. There are just too much noise and the reality is everyone is still buying and those who have missed out are hoping that the fever cools down so that they can jump on the bandwagon - that is the anxiety of which real market sentiment remains positive.

Moss' comments cannot be taken lightly. Neither do the remarks by migrant's comments. If City Dev is still looking Down Under via Leighton's non core asset disposal and Fragrance thinks that property down under is cheap, then we should position ourselves in the Bosses' shoes.

Negative gearing is a deep rooted property investment structure unique to Australia. Whist you will never appreciate and neither do I, we should not make broad brush comments on a deeply rooted social norm for hardworking Australians. Instead, one should continue to investigate the behaviour behind negative gearing and decide if one could take advantage of it directly and indirectly.

Lastly, an visible seller is not an outright enemy. Its the intention of the invisible buyers, the secret admirers that is more potent and of more interest to me.

YMMV
GG

(27-09-2014, 11:52 AM)piggo Wrote: [ -> ]It's currently trading at ~20% discount to book, which is pretty much in line with other developers.

They may spin this off or spin that off, but they may and can also sit around, do nothing for a long long time (with mediocre results). With nothing concrete, it's quite hard to gauge. Uncertainties in Aussie property market (changes to first time buyers, foreign investments etc etc.) isn't helping either. Meanwhile, short of any further developments, I'd think 1.7 is a reasonable price. Definitely beats investing directly into Aussie property with everyone on negative gearing!

Anyway since I need to average down significantly, plus the millions of share on 1.70 sell queue capping its upside, I'd say it's got a fair value of 1.5 ;p
"Negative gearing is a deep rooted property investment structure unique to Australia. "

sorry for me being noob, may I know whats negative gearing?

first time come across
If an asset is loss making, the owners can declare it as losing money and claim tax rebates. So for properties down under, if income stream (i.e rents) cannot cover expenses (interests, maintenance etc) the losses can help reduce tax.

That's my understanding of it.