Rich Lister Paul Little hopes to commence construction on a new 30-storey hotel off Melbourne’s Flinders Lane as early as next month after receiving approval for the project last week.
Little Projects has reached a preliminary agreement with an international hotel operator for the 278-room luxury hotel, but Mr Little declined to name the operator or the brand on Friday.
“We’ve got to sign a formalisation of the agreement with the operator,” he told The Australian Financial Review at an event to celebrate completion of his group’s Dux residential project in Melbourne’s Richmond.
The hotel is the first such project for Little Projects, which has expanded from its core focus on residential after becoming “very cautious” about the sector at a time when foreign sales are slowing and tighter credit conditions are pushing some developments to the brink of failure.
Little Projects paid strip club owner Peter Iwaniuk $28.6 million in October for the 1187-square-metre site with permit for a high-rise residential tower at 9-27 Downie Street. Last month, a block away on King Street, Rialto building co-owner Lorenz Grollo secured control of the entire notorious nightclub strip after a long-running campaign when it purchased the premises of the Inflation Nightclub from Mr Iwaniuk.
Last week’s permit amendment allows Little Projects to change the development to hotel use, while keeping the current envelope. A two-storey warehouse currently sits on the site.
The slowing market for apartments – which has left more than one-quarter of apartments unsold in developer Fragrance’s nearby “Beyonce” tower – is hastening a trend away from residential in the Melbourne CBD that started in 2015 after overnight planning changes to density ratios prompted developers to look at other uses for sites.
The same has happened in Bankstown in Sydney’s south-west, where sites earmarked for apartments have also been put on the market.
Mr Little said the environment for residential development had changed sharply since he made the feasibility case for the Rothelowman-designed, 12-storey, 175-unit Dux project.
“We put the feaso together in the middle of what was a bull market,” he said. “It was an amazing time. Everyone was becoming a developer. This feaso stacked up really well.”
That was three and a half years ago, however.
“Today what happens with a development … you never know if it’s succeeded until all the settlements have happened,” Mr Little said.
The fully-sold Dux project, about 75 per cent sold to owner-occupiers, is due to settle in coming weeks.
The value of Melbourne units has flatlined over the past 12 months, figures from data provider CoreLogic earlier this month showed. Detached house values have fallen 0.6 per cent over the same time.
As part of its diversification, Little Projects is working on a student accommodation project in the Melbourne CBD. Mr Little declined to give any further details of it on Friday.
Earlier this month, his company said it had purchased a 28-hectare site in Cranbourne West in Melbourne’s outer south-east for $19.1 million. It will develop the site at the corner of Central Parkway and Paramount Boulevard into a mixed-use development in a partnership with advisory firm Pomeroy Pacific.