Doing it tough in Queensland
14th Nov 2011
The state's real estate downturn is hurting even the wealthiest of the wealthy.
Matthew Cranston
Former BRW Rich lister Anthony Barakat threw the keys to his Bentley across the boardroom table, landing them in front of a prospective property buyer.
"If you buy (the property) at that price I will throw in the Bentley," Barakat said, keen for an immediate sale of his retail properties in Brisbane's Fortitude Valley.
The potential buyer took the keys, flicked them back to Barakat and said: "I already have two".
That boardroom scene has made clear which side of negotiations has the upper hand in what many say is Queensland's worst-ever property downturn.
At least 20 alternative financiers and second-tier lenders have exited and the big four banks have drastically restricted lending terms.
Thousands of apartments and homes are unsold or empty across the south-east, with financiers selling out at 50 cents in the dollar.
Values across all sectors have been carved up - a large retail asset on the Gold Coast sold on Wednesday for a 74 per cent discount to its price of three years ago.
On the receiving end, dozens of boom-time developers, from pub baron Tom Hedley to, more recently, Con Nikiforides' with his palatial Oracle high rose tower on the Gold Coast, have seen their companies placed into receivership with desperate creditors applying the blow torch.
While buyers still have the dominant market position, getting a property deal over the line these days tests to the extreme the patience of all involved, including agents, banks, receivers and most notably those higher-profiled property millionaires who were once sitting at the top.
Take one of Brisbane's social elite, the media-shy property developer and dentist Nick Girdis. While he is regarded as "old money" in a city like Brisbane and maintains a strong financial position, he has not avoided the sting of the downturn. In 2008, just as the market was about to tank, a joint venture between Girdis and a company whose ultimate shareholder is Lloyds International bought an office tower at 100 Edward Street, Brisbane for $53.5 million.
The building has just been sold for $46 million.
Getting the deal done has had its moments too, with the chief financier behind the joint venture, Bank of Scotland, having to phone home after each formal bid from the buyer was lodged. But Girdis, unlike many other developers, is a long, long way from selling the family home or one of his 100-foot yachts.
Barakat is not.
His six-bedroom palace on the hill in the exclusive suburb of Hamilton has just gone up for sale. The address on the listing is not given, but the mansion is recognisable. There are five marble bathrooms and a large pool with views of the city.
The former hairdresser, whose wealth was last estimated by the BRW Rich List in 2009 at $157 million, will be hoping he has better luck selling the home than he did selling his Kangaroo Point property last year. That clifftop block overlooking the river was sold for $4.74 million after being bought for $6.7 million just two years before.
Barakat is philosophical about deals: "We buy and sell property-that's what we do," he tells the Weekend Financial Review. "We are in the property business and, yes, things are a bit tough at the moment."
Barakat is one developer who has been under some pressure to do deals. Last year he sold the landmark watering hole, the Grosvenor Hotel on George Street, for $4.4 million. He had bought it in 2007 for $8 million.
Two of Barakat's companies have been put into administration this year, including Boutique Property Services and AB George, and there are few signs the market is set to improve for him. His effort to sell the retail asset in Fortitude Valley seems to have come too late, with talk that he earlier declined a cash offer from construction company Grocon. There were no Bentleys offered in that deal. Barakat may have failed to get the money he paid for his properties and he may still be struggling to do deals, but he has avoided the failure of other developers. Most recently it is one time professional sailor and frequenter of St Bart's in the Caribbean, Russell McCart, who has come under pressure.
McCart just couldn't get the sales required for his luxury units at Port Airlie in far northern Queensland and now joins the list of developers who have tried and lost in the area.
More financiers, most notably the Bank of Scotland, want out. In the past few weeks decisions have been made to push more property sales.
Westpac Banking Corp took Cold Coast property owner Robert Sukic to the Supreme Court in Brisbane last month, forcing him to vacate his own space in an office tower which he used to own until it was placed into receivership.
The difficulty in getting deals done prolongs the time and ramps up the cost of holding property. The situation continues to fester with property analysts LandMark White estimating that 55 per cent of all assets on the market in Queensland are now distressed.
Article Source : The weekend Australian Financial Review - Business Property - October 29-30. 2011
