MJM Property Group

December 2004 Issue
Market Trends: News from the Industrial Market
Western Suburbs Industrial Investment Sales Hit Record (Low) Yields
Economic Briefing: St.George Bank Property Finance Breakfast
2004 Property Highlights
Outside the Office: RICS - API Golf Day
Happy Festive Season!

Market Trends: News from the Industrial Market

Two recent client appointments illustrate the emerging role that small advisory firms such as ours are playing in the world of commercial and industrial real estate.

At 1 George Place, Artarmon MJM has been appointed as the lessor's representative in the co-ordination process for the leasing of this 3,000m2 building in the heart of this prime North Shore industrial precinct.

MJM's role is not to lease the property in competition with the appointed agents but to assist in all aspects of the marketing programme offering advice on advertising, building presentation and the vital role played by the other leasing agents in Sydney. Many investors are too busy to keep a day-to-day focus on the promotion of their property and the idea of outsourcing this function made perfect sense to the landlord, Caltra Pty Ltd.

Silverwater Auction a Valuable Learning Experience

Meanwhile, on the other side of Sydney, the auction of a small corner site on Silverwater Road at Silverwater with an existing building in place was of great interest to a potential owner-occupier, Australian Plastic Fabricators of Ultimo. MJM acted for APF at the auction that saw the bidding stop short of the reserve price and eventually result in no sale. APF’s Robert Powell stated, “The whole auction process was intimidating and it was great that we had an experienced professional like Michael to hold our hand and more importantly not pay too much for the property”. “It was a tremendous learning experience and I would suggest any potential buyer of a business property uses an independent consultant where needed”.

Western Suburbs Industrial Investment Sales Hit Record (Low) Yields

Excel Australia Building, Huntingwood - $25.5m (7.7% net yield–8 yr lease) South Pacific Tyres, Girraween - $3.3m (8.47% net yield – 4,000 sqmt NLA) CHEP Depot, Milperra - $4.13m (7.3% net yield – 4,200 sqmt building area)

Economic Briefing: St. George Bank Property Finance Breakfast

30 November 2004 saw MJM attend an extraordinary economic briefing at the Sofitel Wentworth Hotel in Sydney. The main speaker was Steve Ryan the Chief Economist at St.George Bank who believes that a minor slowdown is underway in the residential sector whilst all the commercial markets move ahead strongly (particularly industrial).

Ryan stated that due to a wide range of factors, interest rates may increase by 0.25% in mid 2005 with a possible 0.25% further increase at the end of 2005. This was the worst- case scenario and he believed that the first increase may put the Reserve Bank sufficiently at ease. The only unknown factors are unemployment and the War Against Terror.

Unemployment tends to work in direct opposition to interest rates - as unemployment levels fall during 2005, pressure for interest rate increases will emerge. Also, Steve analysed 200 years of history and without exception major wars resulted in higher interest rates. If the Iraq War drags on and the price of oil increases further, interest rates will again be under upward pressure.

Despite the fact that building approvals fell by 2.4% in October there was ample support for the view that approvals would turn around slowly in 2005 leading to a steady improvement in the residential development market.

2004 Property Highlights

Prestige Home Sales: Sydney has averaged eight residential home sales in excess of $10m in three of the last four calender years. 2001, 2002 and 2003 saw eight sales whilst 2004 had NINETEEN SALES over $10m!

The Median Residential Sale Price plateaued for the first time since 2000.

Property Trust Sector Consolidation: In the middle of a booming stock market new listings like Multiplex soared, multi sector companies merged or stapled and various friendly and hostile takeover battles took place.

Put these questions in your diaries now… who will own GPT? Westfield, Stockland or somebody else? How will the Mirvac – James Fielding marriage progress? Will the major trusts continue to outperform the smaller boutique entities? What new funds will come to the market?

Outside the Office: RICS - API Golf Day

Thursday 30 October 2004 will go down in history as the day the Strugglers beat the Legends. MJM’s team of Tony Leong, Bruno Gallace & Greg Boyer achieved the impossible and beat the big end of town.

Nissan’s Move To Homebush Is Now Complete

The annual Royal Institute of Charted Surveyors and Australian Property Institute Golf Day at Manly saw a dream come true. OK it may have been on a countback but it was still a win for the underdog and we’ll be back next year to defend the title!!

It’s been over 2 years since MJM last won a prize at a corporate golf day…and that was the Bradman Award at Avenue Capital Management’s Castle Hill event in 2002.

Happy Festive Season

To all our clients and friends that have supported us and used our services throughout the year…THANK YOU… we’ll be back again next year better than ever!