This article is from the Australian Property Journal archive
MIRVAC has struck an agreement with Boral to develop a $1 billion community across a 171-hectare clay quarry and brickworks site in Melbourne’s eastern suburbs.
The marks the second deal of its type between the developer and building products manufacturer, following on from the Olivine housing estate in the northern fringe suburb of Donnybrook on another Boral quarry.
As part of the Scoresby agreement, Mirvac will manage development of a 1,700-home estate that would be completed in 2035. It is the second major project announced by the property heavyweight since it undertook a $750 million capital raising earlier this month to fund $2 billion worth of “advanced acquisition opportunities”. As well as the build-to-rent project overlooking Queen Victoria Market that was confirmed in the days following, Mirvac also flagged the Scoresby deal as a “Melbourne middle ring residential master planned community in an “attractive infill location”.
The project is subject to rezoning, and the removal of an existing parks acquisition overlay that gives the Victorian state government purchasing rights for use as parkland. Boral and Mirvac say parkland will be included in the new estate, which is next to Dandenong Creek parkland.
Formerly a manufacturing plant for Boral Bricks, Boral has retained ownership of the site since offloading its 40% interest in the Boral CSR Bricks joint venture to CSR Limited in November of 2016. CSR currently leases part of the site until 2025.
Boral expects to receive around $66 million in fees through to FY2026, including $3 million in FY2019, and more than $300 million in earnings of the life of the project, with “additional significant earnings” projected from FY2027 through to the’s anticipated completion in 2035.
Early works, including rehabilitation, rezoning and initial development activity, will take place through to the end of CSR’s lease.
Mike Kane, Boral’s chief executive officer and managing director, said Boral has a long and strong track record of delivering earnings from property assets and working with property developers to maximise returns.
“Together with the Donnybrook development, which we announced a year ago and is also being managed by Mirvac, Scoresby will be an important earnings contributor for Boral over the next 20 years. Scoresby and Donnybrook developments are expected to deliver in excess of $500 million of proceeds for Boral, subject to market conditions over that time and rezoning of Scoresby.”
The 187-hectare Donnybrook estate will comprise 2,250 lots that will be home to up to 7,000 people. Mirvac expects around $450 million in revenue from the project.
Boral is also eyeing off potential end-use opportunities at its Waurn Ponds and Penrith Lakes sites.
Mirvac remains on track to achieve more than 2,500 settlements within its residential business for FY19. Despite the soft market, defaults at its projects have been contained to within 2%.
