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Why Invest in Australia 1© 2017 Deloitte Touche Tohmatsu. All rights reserved.
Australian Real Estate Market
Will it continue to boom?
5 June 2017
Why Invest in Australia 2© 2017 Deloitte Touche Tohmatsu. All rights reserved.
Advisory & Consulting
Highest and Best Use
Asset optimization
Feasibility modelling
Stakeholder advisory
Portfolio & options analysis
Provided strategic advice on
over 3,000 property assets
Occupier Advisory
Creation of a corporate real estate strategy
Tenant representation
Operating model enhancements & cost savings in real estate platform
Re-alignment of Real estate platform to suit business need
Advised on over 3 million
square metres of space
Construction & Project Assurance
Development Management
Construction & Project Management
Superintendent Services
Overseen 100+ projects from
concept to completion
Transactions Services
Connect major capital providers and developers
Structuring Joint Ventures
Procurement of primary debt, equity or mezzanine funds
Buy & Sell side mandates
Lead transaction advisor on
over $3 billion of capital
raised or assets transacted
ConsultingAudit Tax Financial Advisory Risk Private Clients
Deloitte Real Estate – Where we fit and what we do
Why Invest in Australia 3© 2017 Deloitte Touche Tohmatsu. All rights reserved.
Perspectives on Australian economy and property market
Why Invest in Australia 4© 2017 Deloitte Touche Tohmatsu. All rights reserved.
The core drivers of Australia’s property fundamentals
• A strong and growing economy
• A place where people want to live and work
• A safe and transparent place to do business
• An established destination for foreign investment
A robust property market with
additional upside potential
Why Invest in Australia 5© 2017 Deloitte Touche Tohmatsu. All rights reserved.
A strong and growing economy
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Australia Canada United States United Kingdom Euro Area Japan
Comparative GDP Growth Rates of selected advanced economies
2000 - 2015 2016 - 2021
Source: IMF
Australia currently holds the world record for
the longest period without a recession
GD
P G
row
th p
er
annum
Why Invest in Australia 6© 2017 Deloitte Touche Tohmatsu. All rights reserved.
0.0
1000.0
2000.0
3000.0
4000.0
5000.0
6000.0
7000.0
8000.0
9000.0
10000.0
Dec-2000 Dec-2002 Dec-2004 Dec-2006 Dec-2008 Dec-2010 Dec-2012 Dec-2014 Dec-2016
Australia Household Net Worth (A$ Billions)
A strong and growing economy
Source: Australian Bureau of Statistics (ABS)
Why Invest in Australia 7© 2017 Deloitte Touche Tohmatsu. All rights reserved.
A place that people want to live and work (1/2)
0
2
4
6
8
10
12
14
16
18
20
22
24
26
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Australia Population (millions)
95
100
105
110
115
Population Growth Projections Index 2015-2021 (2015 Population = 100) - Select
Advanced Economies
Source: International Monetary Fund
Source: International Monetary Fund
Why Invest in Australia 8© 2017 Deloitte Touche Tohmatsu. All rights reserved.
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000Ja
n-8
0
Jan-8
3
Jan-8
6
Jan-8
9
Jan-9
2
Jan-9
5
Jan-9
8
Jan-0
1
Jan-0
4
Jan-0
7
Jan-1
0
Jan-1
3
Jan-1
6
Overseas Arrivals into Australia
Source: Australian Bureau of Statistics (ABS)
A place that people want to live and work.. and play! (2/2)
0
20,000
40,000
60,000
80,000
100,000
120,000
Jan-9
1
Aug-9
2
Mar-
94
Oct-
95
May-9
7
Dec-9
8
Jul-
00
Feb-0
2
Sep-0
3
Apr-
05
Nov-0
6
Jun-0
8
Jan-1
0
Aug-1
1
Mar-
13
Oct-
14
May-1
6
Monthly Arrivals into Australia – Chinese
Tourists
Why Invest in Australia 9© 2017 Deloitte Touche Tohmatsu. All rights reserved.
0
2
4
6
8
10
12
Str
ength
of
Legal Rig
hts
Index
A safe and transparent place to do business
Transparent Property Market
Higher Scores = Greater Strength of Legal Rights
Source: Transparency International Corruption Perception Index
Source: World Bank Doing Business Survey
91 9086 85
81 8179
75 75
37
29
0
10
20
30
40
50
60
70
80
90
100
Co
rru
pti
on
Percep
tio
n I
nd
ex
Opaque
Tra
nspare
nt
Respected Regulatory Environment
Weak
Str
ong
Why Invest in Australia 10© 2017 Deloitte Touche Tohmatsu. All rights reserved.
Resulting inflow of foreign capital into property market
Source: Australian Bureau of Statistics (RBS), RCA; Colliers International, Courier Mail
Why Invest in Australia 11© 2017 Deloitte Touche Tohmatsu. All rights reserved.
Property market perspectives
Why Invest in Australia 12© 2017 Deloitte Touche Tohmatsu. All rights reserved.
Residential Market – a tale of two cities
60
80
100
120
140
160
Residential Property Price Index
Sydney Melbourne Brisbane Weighted Average of eight capital cities
Source: Australian Bureau of Statistics (ABS)
Why Invest in Australia 13© 2017 Deloitte Touche Tohmatsu. All rights reserved.
CBD Office: Weighted Average Yields by grade
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q2017
Secondary Prime
Why Invest in Australia 14© 2017 Deloitte Touche Tohmatsu. All rights reserved.
Recent Transactions: CBD Office
Location Asset Sale Date Sale Price (Million AUD)
$/m² Lettable Area
Approx. Yield
Origin of Capital
PREMIUM GRADE ASSETS
BrisbaneGreen Square Jan-17
$205.5M $11,664 6.3% South Korea
Brisbane 324 Queen St Oct-16 $132M $6,642 7.14% Australia
Melbourne World Trade Centre, Docklands Jan-17 $267.5M $5,350 6.5% Australia
Melbourne Southgate Complex, Docklands Nov-16 $578M $7,584 6.4% Singapore
Sydney 1 Shelley St Apr-16 $525M $15,916 5.48% Australia
Sydney 420 George St Apr-16 $442.5M $15,565 5.3% Australia
SECONDARY GRADE ASSETS
Brisbane Mineral House Feb-16 $159.8M $5,424 8.70% Australia
Melbourne 120 Spencer St Apr-16 $165.2M $5,128 6.92% Australia
Sydney 15 Castlereagh St Mar-16 $120M $9,335 6.0% Foreign
Why Invest in Australia 15© 2017 Deloitte Touche Tohmatsu. All rights reserved.
Recent Transactions: Large Format Retail
Location Building Name GrossLettable
Area (m²)
Sale Date Sale Price (Millions
AUD)
$/m² Lettable Area
Approx. Yield
Origin of Capital
Melbourne Casey Central Shopping Centre 28,699 Dec-16 $220M $7,666 5.3% London
Melbourne DFO Southwharf 56,281 Feb-17 $565M $10,039 7.0% Australia
Sydney Mid City, Pitt Street Mall 9,426 May-16 $320M $45,265 4.6% Hong Kong
Sydney Campbelltown Mall 42,199 Aug-16 $197M $4,668 6.0% Australia
Brisbane Toombul Shopping Centre 46,754 Jun-16 $228.1M $4,879 6.5% Australia
Gold Coast Runaway Bay Shopping Village 37,990 May-16 $320M $8,423 5.9% Australia
Why Invest in Australia 16© 2017 Deloitte Touche Tohmatsu. All rights reserved.
Recent Transactions: Industrial and Subdivisions
Location Building Name Use Sale Date
Sale Price (Million AUD)
$/m² GLA Yield Origin of Capital
QLD Curlew St, Port of Brisbane Logistics Dec-16 $35.1 $1,301 7.1% China
VIC 1 Hume Road, Laverton North Cold Storage Feb-16 $205.88 $1,673 6.8% China
NSW 274 Victoria Rd, Rydalmere Manufacturing Jul-16 $47.6 $2,094 6.03% Australia
Location Address Sales Price
(AUD)
Land Area (Ha)
Rate/ m² Sale Date Origin of Capital
QLD Teviot Downs Estate, Greenbank $50m 153 $33 Sep-16 Australia
QLD Eden’s Crossing, Redbank Plains $30.3m 33 $90 Jul-16 Australia & Thailand
VIC 1030 Dohertys Rd, Tarneit $70m 62 $113 Mar-17 Australia
VIC Sayers Rd, Tarneit $180m 184 $98 Mar-17 Australia
VIC 50a Hacketts Road, Point Cook $190m 103 $185 Dec-16 China
NSW 64 Mackillop Drive, Baulkham Hills $87m 12.5 $696 Dec-16 China
NSW Richmond Road, Blacktown $290m 95 $305 Jun-16 Australia
Land Subdivisions
Industrial
Why Invest in Australia 17© 2017 Deloitte Touche Tohmatsu. All rights reserved.
An unprecedented funding opportunity
Why Invest in Australia 18© 2017 Deloitte Touche Tohmatsu. All rights reserved.
An unprecedented funding opportunity (1/3): Background
The Australian Prudential Regulatory Authority (APRA) has tightened lending regulations for Australian banks, particularly in relation to property exposures
By way of example, where banks previously lent up to 80% of costs to develop a residential apartment project, very few developers are securing loans to fund over 60% of costs
As a result, many experienced local developers with high quality, de-risked projects with strong pre-sales in place are awaiting funding to proceed
An opportunity exists to lend on terms previously offered by the banks, including first mortgage security, while securing internal rates of return between 10% and 15%
A number of experienced international investors are pursuing this opportunity, including:
Why Invest in Australia 19© 2017 Deloitte Touche Tohmatsu. All rights reserved.
An unprecedented funding opportunity (2/3): Bank Pullback
Source: ABS; APRA
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Jun 2
014
Sep 2
014
Dec 2
014
Mar
2015
Jun 2
015
Sep 2
015
Dec 2
015
Mar
2016
Jun 2
016
Sep 2
016
Dec 2
016
Annual Growth in Commercial Lending Limits to Residential
Developments
Land development/subdivisions Other residential
Why Invest in Australia 20© 2017 Deloitte Touche Tohmatsu. All rights reserved.
Location • Gold Coast, South East Queensland
Project
• Iconic residential project led by highly
experienced sponsor
• c. US$100m Total Development Costs
Facility Description
• c. US$70m senior construction facility
• 75% Loan to Cost
• 65% Loan to Net Realisable Value
Indicative Returns • Net yield of c. 13% IRR (in US$)
Security
• First Mortgage
• Personal Guarantee from sponsors with
US$75m+ net worth
• 120% Pre-sale coverage
An unprecedented funding opportunity (3/3): Case Study
Why Invest in Australia 21© 2017 Deloitte Touche Tohmatsu. All rights reserved.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
About Deloitte
Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte's approximately 200,000 professionals are committed to becoming the standard of excellence.
About Deloitte Australia
In Australia, the member firm is the Australian partnership of Deloitte Touche Tohmatsu. As one of Australia’s leading professional services firms. Deloitte Touche Tohmatsu and its affiliates provide audit, tax, consulting, and financial advisory services through approximately 6000 people across the country. Focused on the creation of value and growth, and known as an employer of choice for innovative human resources programs, we are dedicated to helping our clients and our people excel. For more information, please visit our web site at www.deloitte.com.au.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
© 2017 Deloitte Touche Tohmatsu