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Three Sydney unit blocks on the market for the first time in decades could fetch more than $10 million each

October 5, 2018

The corner property in Bondi, where the Fruitologist is, has been listed for the first time in 80 years. Photo: Mark Merton Photography

Three unit blocks across Sydney’s waterfront suburbs with a combined value of more than $30 million have been listed for the first time in at least 50 years.

The fully tenanted properties in Bondi, Manly and Kirribilli are being offloaded by three separate families after being handed down through generations, and could sell on yields of between 3 and 4.5 per cent.

The San Remo building at 151-157 Bondi Road, Bondi, is being listed for the first time in 80 years, with hopes of more than $10 million.

The property has 990 square metres of floorspace over two storeys, occupying a 771-square-metre corner site.

The Manly unit block is one of three inter-generational assets on the market. Photo: Mark Merton PhotographyThe Manly unit block is one of three inter-generational assets on the market. Photo: Mark Merton Photography

It comprises of eight two-bedroom residential units and two ground-floor retail spaces, leased to the Fruitologist, which has occupied the space for 60 years, and Wellington Cake Shop, which has been there for 40 years.

The residential and retail tenants earn a combined $587,000 in gross rent a year.

CBRE’s Nicholas Heaton, who is marketing all three properties, said there was potential to develop the Bondi block, despite it being a local heritage item, but developers would need to hold it for a while.

“The Bondi one’s definitely in a precinct that’s earmarked for rezoning along Bondi Road, Walker Corp’s doing a rezoning two or three doors up,” he said.

“But (you can’t develop) under the current planning, you have to wait for a rezoning.”

The site is zoned for mixed use and has a building height of 13 metres or about four storeys. The current floor space ratio is 1.5:1 but if this is revised to the proposed 3:1, more than 2300 square metres of floor space could be achieved.

In the city’s north, a block of 17 residential units at 10 Victoria Parade, Manly, is being sold for the first time in 60 years, while 11 apartments are being sold in one line at 63 Carabella Street, Kirribilli, for the first time in 50 years. Both properties have price indications of more than $10 million.

The Manly property generates a gross income of $520,000 a year, while the Kirribilli block brings in about $320,000.

While the buildings in Manly and Kirribilli do not have development potential, Mr Heaton said the residential units could be reconfigured into larger or smaller apartments. The units could also be converted into strata title and resold.

The units in the Kirribilli building has views of the harbour. Mark Merton PhotographyThe units in the Kirribilli building have views of the harbour. Photo: Mark Merton Photography

Mr Heaton said it was “just a coincidence” that the three properties had hit the market around the same time.

“(The vendors) are not market-driven; when you’ve held a property for 50 or 60 years, you don’t make a call to sell due to any market factors.”

He said the lower returns would not be an issue for investors seeking “low-risk investments”.

“(Unit buildings are) considered safer than putting money in the bank for a better return, so you get 3 or 4 per cent initial return and you get your capital growth, which Sydney’s averaged around 6.5 per cent (a year) over the last decade,” he said.

“It’s considered a low-risk investment because they’re located in strong demographic areas where there isn’t much supply of apartments and there’s huge amount of renter demand.

“(Residential) vacancy rates in all these markets are below 3 per cent. When vacancy’s below 3 per cent, that really just means as soon as someone moves out, another person moves in.”

Mr Heaton said while discussions of the build-to-rent sector among institutional players have been heating up this year, it is an asset class that has been around for more than 50 years in Australia, albeit on a smaller, private-investor scale.

“Multi-family assets are very much talked about now but most private clients have got one or two apartment blocks to their portfolio. All of these clients have got other blocks in the portfolio but they’ve just chosen to sell one at the moment,” he said.

“They provide the security of income in a market that is starting to favour renting more and more, over purchasing.”

Expressions of interest for the Bondi and Kirribilli assets close October 17, and the Manly property is scheduled for auction on October 23.

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