Future Estate has sold a quarter of a four-hectare site in Melbourne's northern suburb of Coburg for more than double the price it paid less than two years earlier.
The developer received $12.8 million, or just under $1400 per square metre – a big gain on the $600 it paid in April 2015 – for three combined lots totalling 9200 square metres at Coburg Estate, the site of Melbourne's historic Pentridge Prison.
The deal that allowed Future Estate to cut its debt also removed any question mark over the commercial value of the site that privately owned Future Estate purchased in a receiver sale, managing director Ben Anderson said.
"This transaction shows there's a vibrant, strong and active demand for apartment product in Coburg," he said.
Residential demand is certainly growing. While median house-price growth in Coburg has level-pegged metropolitan Melbourne over the past five years, the former working-class suburb accelerated last year.
Over the 12 months to December, Coburg prices jumped 13.8 per cent to a median $865,000, while Melbourne rose 10.3 per cent to a median $795,447, figures from Fairfax Media-owned Domain Group show.
The suburb, which draws predominantly local buyers priced out of inner northern areas such as Brunswick, leaped further ahead in the last quarter of the year. Coburg prices gained 6.8 per cent in the three months to December while Melbourne increased 3.6 per cent.
Future Estate has sold about 85 per cent of the 148 apartments planned for its first tower on the site and expects to start construction by Easter, Mr Anderson said. It has yet to get a permit for the second stage, a development of 38 townhouses.
The gain on the lots sold with permits for 294 apartments reflected the risk Future Estate had taken when it paid $26.5 million for the 4.2-hectare site – part of the 16-hectare Pentridge grounds subdivided after the prison closed in 1997 – in a receiver sale, Mr Anderson said.
Since buying the land, Future Estate had established the validity of the original master plan for the site and extended the sites' development permits that had lapsed. The developer also spent less than $3 million – in contrast to estimates of up to $9 million, Mr Anderson said – to remove stockpiled soil from the site.
Local developer Golden Sunrise, which purchased the combined lots, would still be able to make a 20 per cent margin by selling its own apartments on the site, he said.
"They'll do very well from this," Mr Anderson said. "There's a lot of meat on the bone for them."
