Institutional investors have built new addresses for Sydney’s rich. SIMON MUMME reports.
Investors in the new Sydney luxury apartment block, The Residence, aim to earn more than 20 per cent of what they paid to build it, plus an undisclosed internal rate of return.
AMP Capital Investors, real estate funds manager Galileo Group and Cbus Property together invested $80 million of equity, plus two tranches of debt, in the project. They converted the old NSW Police Headquarters building into a 23-level residential tower with 83 apartments and four penthouses. The properties are selling for between $3 million and $6 million, and charge annual strata levies of $100,000.
“We built big units, so the price points are up there. But we’ve proven that there is a market for this type of product,” says Dale Phillips, head of opportunistic investments in the real estate arm of AMP Capital Investors, which invested in the project through its Select Property Portfolio No. 3.
Seventy-five of the 87 properties were bought when Investment Magazine went to press. Many acquisitions were made from the architectural plan and most properties should be bought by June. Most buyers will live in the properties rather than rent them, Phillips says.
Each unit has views of Hyde Park and the city skyline. Some look over St Mary’s Cathedral to the Sydney Opera House and others past Kings Cross to the eastern suburbs.
AMP Capital and Cbus each hold 50 per cent of preferred equity in the development. This gives them “certain control rights over material decisions,” such as the pricing of apartments, Phillips says.
AMP Capital sought financing shortly after the collapse of Lehman Brothers in September 2008. It began marketing the development in October and later garnered $105 million in pre-sale commitments, which funded the start of construction in August 2009.