By Bill Nicholas
The imminent sale of Adelaide's Flinders Link twin office tower complex to a Sydney-based international investor for a price expected to be around $130 million is a major win for a new player in the Adelaide property market. Flinders Link developers George Kambitsis, Peter Gibberd and Simon Chappel will score a major coup for Adelaide business when the deal, currently undergoing the final stages of a due diligence process, is completed early this month. None of the key players would comment on the sale price.
The project is a joint venture between Hindmarsh (Gibberd is its CEO), Adelaide developer Kambitsis and Chappel's PT Building Services group.
The deal is particularly sweet, not only for the price - which, at a yield generally thought to be about 6.9 percent, makes it one of the best in Adelaide for many years. This consortium has also managed to attract two of the biggest and best customers for office space in the city - Santos and the Australian Insurance Group - from under the nose of the Perth-based Caversham Group, which has its major office tower being built in Waymouth St between the old and new Advertiser buildings.
The purchaser of Flinders Link is thought to be Record Realty, a subsidiary of the stellar Allco investment group. Allco is described as a structured finance group.
Structured financiers have the ability to generate maximum returns from a property portfolio by taking a more creative approach to the total financial picture - using techniques such as selling off building allowances to people with large incomes in need of tax relief, or taking a hard-edged approach to depreciation. They also syndicate the investment by retailing to individuals through investment advisers - and generate income through management fees.
In the battle among city property owners to secure long-term leases from strong national tenants, the SA Government has favoured Caversham with a 10,000 square metre tenancy for TAFE. In contrast, Flinders Link was developed without any special assistance from governments.
Chappel is proud of his syndicate's achievement, saying there had been a long hiatus of quality office buildings in the city and this was a new breed of stock. The project started over coffee with Melbourne developer Dominic Matteoli; Chappel and Matteoli bought the old YMCA building, the sale of which had fallen over after a year-long settlement contract by another purchaser.
The Kambitsis Group had a strategic parcel of land in Wyatt St, so they joined forces and then the Adelaide City Council put the old BEA Motors site on the market, so the group tendered successfully for that property. By this time Matteoli was busy on other fronts, so he was replaced over another casual coffee meeting by Gibberd, the state CEO of Canberra-based Hindmarsh, with whom PT had been involved on a number of projects.
Hindmarsh is no stranger to building in Adelaide. The company constructed the Thomson Playford building in Pirie St and several other city developments.
Chappel said the Adelaide City Council was looking for a lage car park for the precinct and because the site they had put together was substantial, their plan to add 700 car parking spaces in the heart of town was most attractive to council. Development approval was given by the Development Assessment Commission, as the council was precluded because it had vendored land into the project.
Santos and IAG also liked the idea of on-site parking for their respective workforces of 900 and 600 people. They liked the Flinders St address and outlook and the fact that quick access to Pirie St would become available through Freemasons Lane.
The twin towers are still under construction with the eastern building - Insurance Australia Group House - expected to be completed in June. Santos House, on the western side of the block, fronting Flinders St, is expected to be completed early next year.
The car park, situated off Wyatt St, is not part of the sale.
IAG and Santos will transfer all of their office staff to the buildings that are being designed for their specific purposes by Hassell's Mariano de Duonni, designer of the new Adelaide airport terminal and the Commonwealth Courts building in Victoria Square.
Santos currently occupies half of the 31-storey tower in Currie St (formerly the State Bank building), and IAG is in the SGIC building in Victoria Square.