Flagship Property Holdings has expanded on its current Melbourne development pipeline by stepping in to help bankroll the completion of Cranecorp Group’s $35 million residential project in Collingwood.
The deal will see the Kerry Stokes-backed Flagship work with its chosen financial institution to provide the finance and development services for the project at 1-3 Otter Street, which is currently in-market and expected to commence construction in the coming months.
Flagship Property Holdings chief executive officer Mark Jarman said the move to join Cranecorp was a departure from its traditional business model but flagged it was looking to explore “all opportunities”.
“The decision to join Cranecorp as the financial and development partner on its Otter Street project is an opportunistic one, driven by a like-minded approach to strategically expand our holdings in Melbourne’s residential market,” he said.
The partnership was forged as a result of delays in Cranecorp’s Collingwood project, thanks to slower-than-expected sales and tighter curbs on credit.
Cranecorp reportedly paid more than $4 million for the Otter Street site, which eventually had to be paid back to joint venture partner Icon.
Cranecorp director John Crane told the Australian Financial Review that higher-margin forms of equity and mezzanine debt financing were likely to deteriorate further, with fewer players in the market than there had been a year earlier.
The Collingwood project hit a hurdle in late 2017 after construction was delayed by slow sales.
Flagship was willing to step in and see the development through under the belief that the “Melbourne market remains strong and will continue to be into the future, especially in the inner-to-middle ring of up to 10 kilometres from the CBD”.
“Melbourne apartment buyers are discerning and savvy, and expect the highest quality, which is aligned with our development philosophy of developing ‘quality over quantity’ in carefully selected areas,” Jarman said.
Flagship’s new involvement came off the back of their completion of the new $150 million Novotel Hotel in South Wharf, part of the $300 million Melbourne Exhibition and Convention Centre expansion, completed last month, and its recent proposal for a $50 million mixed-use development at 195 Lennox Street, Richmond.
The developer is also currently in construction on its $110 million Kodo Apartments development in Adelaide, and has secured development approval for its $60 million second stage.
Flagship confirmed that Otter Street will immediately commence its tender for the construction works in Collingwood, with construction likely to commence in the coming months. Builder and developer Icon, an early venture partner with Cranecorp Group was originally heading the work, but no confirmation has been made.
Icon Awarded $150m St Kilda Road Contract
Meanwhile, the builder has been awarded a $150 million building contract Melbourne-based developer The Shakespeare Group the construction of its landmark residential project, St. Boulevard.
The Shakespeare Group director Catherine Law said the appointment was significant not just for them, but for purchasers as well.
“With recent data from forecasters indicating 79 per cent of Victorians will live in metropolitan Melbourne by 2037, we understand the need to provide high-quality housing in the city’s highly sought-after inner-ring suburbs.
“Commencing construction on St. Boulevard is an important milestone that we are proud to share with our purchasers and future purchasers to give them confidence not just in the project, but in the off-the-plan industry overall,” she said.
The development will feature three residential towers comprising a total of 420 apartments and over 4,000 square metres of 5-star resident amenities and landscaping.