[COM] East Park, Kent Town | 36m | 11 Levels

[SouthAussie94]

Will the crane now go over to Sofitel?

Has that site even been demolished yet? Surely we won't see a crane there until mid next year?

[timtam20292]

Nope, not yet. I had to go in just last week to recharge my metrocard lol. Very keen for work to start on this one though.

[Brando]

This looks absolutely spectacular at night. Brilliant finishes. I hope this is a glimpse of what we can expect on Currie St.

Sent from my HTC_0P6B using Tapatalk

[how good is he]

I agree. I have heard that Sofitel/Currie St is 75% sold but they need close to 100% sold before they will start. So its up to the market/public now when it goes ahead...

[Pikey]

I agree. I have heard that Sofitel/Currie St is 75% sold but they need close to 100% sold before they will start. So its up to the market/public now when it goes ahead...

I've heard to the contrary. As the development is 80% hotel, pre commitment for apartments isn't required.

[Mr Smith]

I agree. I have heard that Sofitel/Currie St is 75% sold but they need close to 100% sold before they will start. So its up to the market/public now when it goes ahead...

I've heard to the contrary. As the development is 80% hotel, pre commitment for apartments isn't required.

Yeah Ive heard similar to Pikey. I spoke to a sales agent in there a few months back (for what its worth) and he said the same thing - its going ahead because they have a contract with Sofitel.

But he also told me that there would be demo/site works B4 the end of 2017 and there is no sign of that occurring as yet.

[Ben]

I was told a couple of months ago that an announcement on construction was imminent... still waiting. This project was launched ages ago. Time to pull their finger out. No wonder Realm and Adelaidean have good sales because they have committed to construction and its not all empty promises. Realm have been exceptionally professional in this process. it was only launched this year.

[how good is he]

If a developer decides to keep the hotel component of the building those floors/rooms are not for sale. The apartment sales help de-risk and get finance for the construction. Unless there are enough sales (or the developer wants to accept the risk and has the capacity to borrow without the required pre-sales) the banks won't lend for construction. So Ben, unless the public/market pulls its finger out [and buys] this won't start...

[Ben]

The developer is keeping the hotel component of the building so those floors/rooms are not for sale. The apartment sales are needed to de-risk and fund the construction. Unless there are enough sales the banks won't lend for the construction. So Ben, unless the public/market pulls its finger out [and buys] this won't start...

How do Hotels get built then given there is no component for sale. And office developments too? By pre leasing... This building is 80% occupied by Sofitel which is more than ample for construction to start on that figure alone assuming they had sold no apartments which is not even the case.

[how good is he]

Ben, that is a very good point that you raised. Many people do not know that all the major Hotels chains [ie Sheraton, Hyatt, Ramada/Wyndham, Sofitel, Pullman, Ibis, Crowne Plaza, Intercontinental etc etc] DO NOT SIGN LEASES. They take no risk whatsoever but agree to simply manage the owner/developers property for a fee under a management agreement. Really no different than renting out your property with an [on-site] property manager. It is say % of income plus all the other assoc costs. So that is even more reason that the developer may in this case need to sell the apartments as the hotel component does not give any benefit to the bank/assist financing. The main benefit is with branding, that the project is given some credibility by introducing a hotel name that is familiar. However as seen with the proposed Sheraton sites - O'Connell St and [Aloft], Mayfield site [and many others] even with a hotel operator agreeing to manage a property, it doesn't guarantee or really help that much...

[Ben]

The developer of Crowne Plaza and Mantra retained the site and had a similar management agreement. I fail to see what your point is. It seems like you are agreeing with me or have i read that wrong?

[how good is he]

The discussion is about a project going ahead & getting built.

Getting the money from the banks to build it is the hardest part.

The developer/owner can choose/change hotel operators and retain the hotel component as they want but that doesn’t help get the money to actually build it.

So your point about signing on a hotel operator being similar to pre-sales and/or a pre-commitment by a lessee is totally incorrect. It has nil effect.

So the developer either has to have (or be prepared to risk) their own money or rely on pre-sales to get the finance to build it.

If you want to get technical, the banks will lend say 65% of the value of the construction. So if it’s a $100m construction cost the developer would have to put in/risk say $35m of their own money or achieve say 70-80% pre-sales (which may be equivalent to say $35m equity/profit on sales.)

Some developers don’t even need pre-sales (esp the established ones/the Chinese) as they have the money (and are prepared to risk their money) to fund the construction.

So my point is if the developer doesn’t have the money (or isn’t prepared to risk their money) and therefore needs enough pre-sales to get the financing, it’s then up to the market/public to pull its finger out (and not the developer) and actually buy in or the project won’t start.

[[Shuz]]

Surely a 10 year operation contract is enough to please the banks?

[rev]

The discussion is about a project going ahead & getting built.

Getting the money from the banks to build it is the hardest part.

The developer/owner can choose/change hotel operators and retain the hotel component as they want but that doesn’t help get the money to actually build it.

So your point about signing on a hotel operator being similar to pre-sales and/or a pre-commitment by a lessee is totally incorrect. It has nil effect.

So the developer either has to have (or be prepared to risk) their own money or rely on pre-sales to get the finance to build it.

If you want to get technical the banks will lend say 65% of the value of the construction. So if it’s a $100m construction cost the developer would have to put in/risk say $35m of their own money or achieve say 70-80% pre-sales (which may be equivalent to say $35m equity/profit on sales.)

Some developers don’t even need pre-sales (esp the established ones/the Chinese) as they have the money (and are prepared to risk their money) to fund the construction.

So my point is if the developer doesn’t have the money (or isn’t prepared to risk their money) and therefore needs enough pre-sales to get the financing, it’s then up to the market/public to pull its finger out (and not the developer) and actually buy in or the project won’t start.

It works similar to if it was all residential dwellings for sale.
Instead of selling off each individual apartment, the majority of the building has a commitment from a hotel chain. So instead of say 300 individual contracts, there's just one contract. Most buildings don't require 100% of available apartments or offices to be 'sold' before construction commences. And even if they don't sell the remaining 20%, they could always incorporate into the hotel component.

[how good is he]

Incorrect Rev, the hotel chain is actually chain making NO financial commitment. There is no lease.

To Shuz re:the banks, why would it be enough to please the banks? It’s basically worthless from the point of financing as their is no security and no financial guarantee. Look at all the developers in the last 10 years that have signed up hotel chains and never went ahead/never got the finance to build. Why is this?

It’s no different than you agreeing with an agent what they will charge you to rent your house if you were to build a house (or hotel in this case).

The agent (hotel operator) is not renting the rooms from you or guaranteeing you anything that you can take to the banks to convince them to give you the money. They are simply engaged to rent/manage the rooms for you and that is only after you get the finance to build it and it actually goes ahead and gets built.