Soho Apartments settlement Wellington

[WGN ex-property manager]

With respect to getting a Soho apartment rented.

The Wellington market is sluggish right now, a bit more so than normal for winter, and winter is never great. I would advise anyone stuck with a Soho with no guaranteed rent to undercut the advertised rentals by 10-20% to just get a tenant in. I've been through these apartments and in my opinion they are especially small and low quality. I believe they will not age well and will look terrible in 5 years, and believe that rentals in the building will drop steadily relative to the CBD rental market over the coming years.

As for the valuations.....
I have a mental image of a conversation that went like this:

Developer (D) : What market cap rate would you give for apartments in this location ?
Valuer (V) : X%, why do you ask?
D: I'm building <this> here
V: OK, what's the rental appraisal?
D: Hang on, let me ask my property manager.

D: Property Manager, if I guarantee a rent of <Y> per apartment, can you guarantee that the rent will be <Y>.
PM : Duh... you're guaranteeing it, of course I can.
D: OK, can I have a rental appraisal for <Y> then?
PM : OK, but why are you guarenteeing to pay over market rent?
D: Never you mind your pretty little head, just write it up.
PM : Ummm... OK

D; Hi Mr Valuer, here's the rental appraisal for <Y>.
V ; Wow, that's a really good rental.... I wouldn't have picked that, but then again I'm not a rental expert, just a Valuations expert.
D : So dividing by the market cap % you promised me earlier gives a value of <Z>...
V : Geez... that a bit heavy, more than I'd have expected. But, hey ho..... that's what the numbers say. I'm still a little wary of the rental numbers... really high.
D: Look, I'm so confident of these rental numbers I'll GUARENTEE THEM in the sale. How's that?
V: Ok... you seem pretty sure of yourself. But I'm still not quite happy here.
D: Look, I'm asking you to value 300 units. I'm paying you $300 per unit for the valuation. Do you , or do you not want $90K in fees for a weeks work?
V: Well... I guess all the numbers do line up.... OK. The units are worth <Z> each. Which is amazing... you must be such a property development genius.
D : Yes, I'm good arn't I? Damn good!

And thus was a valuation written.
The End.

[Jumpin]

Yes indeed, and all this was done at the peak of the boom. I thought there was a council-imposed lower limit on the size of shoeboxes - or is that just in Auckland?
I seem to remember that in Auckland the price of these things plummeted to a a level such that a savvy investor could pick up a few and convert 2 or 3 to a single apartment.

[graemeh]

Yes indeed, and all this was done at the peak of the boom. I thought there was a council-imposed lower limit on the size of shoeboxes - or is that just in Auckland?
I seem to remember that in Auckland the price of these things plummeted to a a level such that a savvy investor could pick up a few and convert 2 or 3 to a single apartment.

That was just Auckland. Perhaps that explains why this company is building in Wellington now

The problem with buying 2 or 3 and converting to a single apartment is that you are still left in a building with 297 other shoebox apartments built to a different standard to yours.

Also, imagine trying to run a body corporate with 300 apartments? You'd need the owners of 100 apartments to turn up just to get a Quorum for the AGM. That's never going to happen!

Update: I heard last night the actual number is 329. The apartments facing Taranaki St have rented well, the others not well.

[Stevegoodey]

http://www.nzhb.co.nz/product/dhb/wh..._homebond.aspx



So that's a fee of 5.52% per year + $200. If you have cash on hand, I'm not very convinced by their "you should certainly achieve a better return on it than the cost of the bond fee".

The advantage of a homebond isn't always based on the difference between the fees payable and the interest earned on the deposit figure.
In a lot of case's putting a homebond in place means the buyer still has their deposit funds in their bank for aditional purchases.

The issue being that in most case's homebonds will take a caveat over your existing equity for 2 to 3.5 times the amount of the deposit.

So if your buying a $350,000 apartment and normal deposit would be 10% then homebonds could render over $100,000 of your equity unusable until after settlement of the unit.

So during the 2-3 years between purchase and settlement a large chunk of your available equity could be out of action for further funding.
Having said that if you have plenty of equity a homebond purchase in a warming proeprty market can be a great tool for investors.

[speights boy]

..... and a lot of people with little equity, and who believed the sales pitch are finding exactly the opposite.

SB

[Stevegoodey]

If they had little equity they would have trouble getting the Homebond approved.

Having said that there are people who must have been approved and then have had their equity "Shrink" over the last 2-3 years.

[speights boy]

When I said little equity, I meant in the new property.

ie. The people who believed the hype and bought overpriced apartments on "only $1,000 down " deals.

SB

[Stevegoodey]

Right gotcha....

But then if you buy a property based on speculation of future gains.......(Blah blah blah)

[speights boy]

.... and yet iloft is launched at $1,000 down.

I just cannot understand, with everything that has happened over the last 3 years, where the buyers come from.

SB

[eri]

wellington

[Jumpin]

.... and yet iloft is launched at $1,000 down.

I just cannot understand, with everything that has happened over the last 3 years, where the buyers come from.

SB

SB didn't you know there's one born every minute ? !!

[partya]

From experience (first hand), I would rank the sales tactics of the Conrad Group alongside that of a fake tan wearing, shiny gold tooth gleaming, sell your mother type car salesperson. Not particularly ethical. Plus the age old adage of "there's a sucker born every minute" (including me) would almost guarantee sales.

[partya]

From todays Capital Times-

WELLINGTON City is in danger of becoming a modern ghetto, say concerned residents who live by the new Soho apartment development on Taranaki Street.
Gus Charteris is the president of the Wellington Inner-City Residents and Business Association, and lives behind the newly completed apartments.
“The smallest apartment in the building is something like 40sqm, which means it’s obviously built for transitional people, and it’s not priced for students,” he says.
Charteris is concerned about what the building means for traffic flow, and he says it’s also reinforced an existing wind tunnel.
“There are 45 families that live down Egmont Street (behind the apartments), but the council didn’t consult us in any way because the building met all the guidelines,” he says. “Now, we’ve got this towering monolithic structure as our view, and it’s incredible the [Wellington City] Council signed off on something so offensive.”
Charteris hopes that the Soho building isn’t a precursor of more high-density “shoe-box” apartments, that were once a trademark of Auckland.
“Auckland had to bring in regulations in the end because it was such a problem. Now we have these Auckland and Australians developers doing the same thing here – they’re not developing to last the distance”.
Anthony Briscoe, who is the chair of the Tea Store Body Corporate on Egmont Street, is equally concerned.
“360 apartments with 25 car parks will place further pressure on parking in the area,” he says. “This building is out of place in the area. It is over sized and dominates the skyline. It has created a wind tunnel effect in the neighbourhood and blocks a great deal of sunlight”.
Briscoe is unhappy that the council wouldn’t discuss the issues with residents before development started, “despite there being more than 100 residents and apartments directly affected”.
“Having been into the apartments I don’t know how people will be able to live in them they are so small – the danger is that they become a modern ghetto in the city”, Briscoe says. “Auckland has realised the perils of these shoe box apartments.”
In 2007, Auckland City Council approved new controls that aimed to stop developers building these apartments, after the city’s smallest clocked in at around 12sqm.
Now, a studio must be at least 35sqm, one-bedroom 45sqm, two-bedroom 70sqm, and three-bedroom plus, 90sqm.
A two-bedroom Soho apartment on TradeMe is 46sqm, much smaller than Auckland’s regulations.
Wellington City Council spokesperson Richard MacLean says it has no plans to introduce size-regulation.
“We’ve looked at the idea before, but decided against it, because it’s an artificial thing saying people should live in an apartment above a certain size,” he says. “It also cuts out people on lower incomes, and we don’t think that Wellington City is a place just for the rich to live.”

[eri]

small at 40m2?, there are apartments in ak that are 14m2

wonder if these people have ever lived and worked in any of the world's big cities

no one is those expects 40m2 apartments with parking near the city center to cost anything but a million$

[arniew]

If there is one born every minute, at least there are plenty of us.

Conrad Properties and a property investment company which markets Conrad apartments are presenting seminars at this weekend's Wellington Home Show