Billionaire Lang Walker has increased his bets on Brisbane’s apartment market, buying a site in the city’s booming Fortitude Valley from listed car dealer AP Eagers for $22.2 million.
Mr Walker, who in 2012 snapped up a pre-approved development site in the city, said Brisbane was undervalued.
“I think Brisbane is a bit behind the other capital cities – it has had a kick in the teeth,” he said.
“Sydney is getting overpaid for sites and that makes it less affordable. In Melbourne, you wonder whether there will be enough people to rent [the apartments there].”
However, Mr Walker’s purchase of AP Eager’s 801 Ann Street is not necessarily all about apartments.
The deal includes a delayed settlement period, with AP Eagers to lease the property for another three years.
Walker is having a bet both ways.
“This gives us the opportunity to work up a scheme within three years, and to pick which way the market is going,” he said.
“We could be in the market within a year for a commercial development or we could do twin residential towers with 350 apartments,” he said.
“I just felt that the opportunity has a heck of a lot of scope here.” The property has street frontage on all four sides and is being used as AP Eagers’ Jaguar, Land Rover and Volvo dealerships.
AP Eagers, which has a market capitalisation of $920 million, is planning to move into state-of-the-art showrooms at Newstead, to be built in coming years at a cost of $7 million.
“That whole strip of car dealers can’t afford to be in that [Fortitude Valley] space any more because the value of the land is far greater than its current uses,” Mr Walker said.
JLL’s national director for investments, Seb Turnbull, said the property was arguably the best site in the valley in terms of options for the developer.
“The immediate demand is for residential developments, but those sites which have a holding income in the short term are attracting greater interest from investors who want more flexibility in terms of their development outcomes.”
Similar strategies have been used already. BRW Richlister Kevin Seymour snapped up McWhirters car park this year for $44 million.
That property, which also has a tenant in place for short term, allows for further development.
Despite strong growth in inner Brisbane apartments, JLL believe this to be a catch-up phase.
“There has been very little new supply delivered in the market over the last five years, and so the development we are seeing currently is a catch-up for that,” Mr Turnbull said.
AP Eagers said in a statement that proceeds from the sale to Walker Group would be used for planned acquisitions.
Morgans analyst Jo Little said AP Eagers had a well-funded balance sheet, but had been noticeably quiet on the acquisition front over the past 12-18 months.