The success of a property development project is heavily influenced at the site selection stage. Before construction begins, developers assess land based on planning controls, feasibility, and long-term project viability.

In this episode, Veronica and Chris speak with Ryan Bennetts, a site acquisition and origination specialist who works directly with developers to identify and secure development opportunities. Ryan explains how developers assess planning controls, evaluate zoning potential, and calculate residual land values before making offers that can run into the millions. The conversation also explores the complex negotiations involved in assembling development sites, particularly when multiple property owners or strata buildings are involved.

With governments introducing new rezoning policies and transport-oriented development initiatives, the development landscape is rapidly changing. Suddenly, many suburban properties are being targeted by developers, and some homeowners are receiving offers far above traditional market value. But as Ryan explains, not every property benefits equally—and the process of turning land into a viable development site can take years.

If you’ve ever wondered how developers identify development opportunities, how land values change after rezoning, or what happens when your property becomes part of a potential development site, this episode pulls back the curtain on the realities of site acquisition.

Episode Highlights

01:22 — Meet Site Acquisition Expert Ryan Bennetts

03:04 — How Developers Hunt for Rezoning Opportunities

07:27 — Why 75% Approval Still Isn’t Enough

09:19 — How Rezoning Reforms Changed the Game

17:39 — Creative Deal Structures and Playing the Long Game

20:51 — Where Development Deals Usually Fall Apart

23:38 — Holdouts, Negotiations, and Owner Leverage

24:52 — The Myth of Unlimited Developer Capacity

25:44 — How Developers Diversify Their Projects

26:45 — Why Sydney and Melbourne Feasibilities Differ

27:29 — Builder Insolvencies and Development Risk

29:09 — Why Some Developers Build In-House

30:34 — The Migration Shift Helping Melbourne

33:00 — Builder Shortages Meet Development Demand

36:25 — Feasibility Sensitivities Developers Watch Closely

38:41 — Conditional vs Unconditional Site Deals

41:25 — Why Rezoning Doesn’t Guarantee Approval

47:09 — The Rise of Build-to-Rent in Australia

48:49 — Final Thoughts and Listener Questions

About the Guest

Ryan Bennetts is a site acquisition and origination specialist working with property developers to identify and secure development opportunities.

His work focuses on sourcing development sites, analysing planning controls, negotiating with landowners, and structuring deals that allow developers to assemble and acquire land for future projects. This often involves complex negotiations with multiple property owners and navigating planning frameworks that determine what can ultimately be built on a site.

Because Ryan operates at the very front end of the development process, he has unique insight into how developers determine land value, assess rezoning opportunities, and decide which sites are worth pursuing. His experience provides a rare behind-the-scenes look at how development projects begin long before construction ever starts.

Connect with Ryan

• Ryan Bennetts - Head of Acquisitions at Central Element | LinkedIn 

Resources

• Visit our website: https://www.theelephantintheroom.com.au
• If you have any questions or would like to be featured on our show, contact us at:
• The Elephant in the Room Property Podcast - questions@theelephantintheroom.com.au
• Looking for a Sydney Buyers Agent? https://www.gooddeeds.com.au
• Work with Veronica: https://www.veronicamorgan.com.au
• Looking for a Mortgage Broker? alcove.com.au
• Work with Chris: chrisbates@alcove.com.au 

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See you on the inside,

Veronica & Chris

TEITR 430

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~Oh, now let me just get rid of that. Um. We'll also dig into the realities of amalgamating lots where policy, ambition, vendor, and fuck. ~We'll also dig into the realities of amalgamating lots to create a development site where policy, ambition, vendor expectations, and commercial logic don't always align.

We've invited Ryan Bennetts an acquisition specialist to join us in this discussion. He's got more than 14 years experience across commercial real estate construction management and acquisitions. Ryan brings a frontline perspective on how developers assess risk, price, potential, and exercise patients in a market where timing can make or break a project.

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Ryan: Thanks for having.

Ryan: Yeah, I appreciate your enthusiasm because I get a lot of questions day in, day out of, you know. How do you do your job, even from friends and family, like, you know, what does it take to put the ideal site together? How do I put a site together? That's what people ask me. ~Um, ~often it is something that I think everyone's got the ambition to do or the, you know, the desire to do, but there are layers of,~ uh,~ complications, complexities, and obviously.

~You know, vendors that, you know, maybe think one thing one day and another thing the next day. So~ it's, ~ uh,~ difficult game and, and difficult challenge. And, and that's why I think leading acquisition people are, you know, well sought after by developers because, you know, sending the right people in to do the right deal is, is very important.

I really believe that, you know, buying upfront sets a development up, you know. For a win from the outset. And if you don't buy well and chasing your tail through the whole project lifecycle, and there's an incredible amount that goes into these projects and they, you know, often when you're talking about multi-res apartment developments as an example, they can be, you know, sort of four to five year life cycles.

You know, what areas and what zones, you know, are, are you dealing with in certain suburbs. So a lot of my,~ uh,~ time in acquisitions has,~ um,~ been spent through like sort of trolling through zoning maps and things like that and identifying pockets within,~ uh,~ prime suburbs that have development potential. The key thing you're looking for,~ um,~ when it comes to planning and planning controls is what locations and what precincts within any certain suburbs or pockets, can I develop in that actually allows a landowner, I should say,~ uh,~ to realize a upside on the value of their property by selling to a developer.

And you know, from a landowner's perspective, that typically requires more of a premium. 'cause they're thinking how does the market catch up or take off between the time that I sell to a developer and the time that that developer actually settles. And that would be one of the key questions that I get upfront for landowners is.

What if the market moves? Do I get a higher price if the market moves between when I exchange with a developer and when I settle with the developer? And that's a key point to navigate. And that's probably the second thing outside of planning. It's, it's dealing with landowners and landowner, ex expectations, landowners questions, educating the landowners, actually, you know, what they're getting into, why the developers are looking at their land.

And then, you know, that sort of leads into the deal. What deal terms are there? What does the developer want? What does the landowner want? And then, you know, from there. Sort of structuring a development framework,~ uh,~ and, you know, so a deal framework and then going into, into more contractual items. Like how does a contract come together?

So there, there's some of the key things that I'm, thinking about upfront.

VM: So typically how many owners might you be dealing with for each site? Do you have an average?

Ryan: I would have to go away and t out my average,~ um,~ I would say it's probably too many for me,~ um,~ because a lot of my time is being spent,~ uh,~ amalgamating, you know, strata blocks and, you know, that's a, that's been a really interesting space, particularly in the last few years as, as. Land. Land has got tighter.

~Um, ~it's, the strata. Strata, you know, amalgamations has been sort of a busy area, a busy space if you will. ~Um, um,~ you know, I've done a deal where I acquired 32 Strata,~ um,~ you know, properties across five different strata buildings to form a development site. ~Um, ~you know, you sort of think about sort of red brick strata blocks.

So one more complex.

VM: so the strata, you've only gotta get 75% to agree, right? If you're trying to deal with, say, four, houses in a street, or five houses in a street, you've gotta get a hundred percent of those owners to agree, or maybe the middle. Three, and then, you know, one or two of the other ones could drop off perhaps.

~Um, ~but with strata, so you, you've got 25%, it doesn't matter. You can override them, but you're trying to coordinate five different, say five different strata plans. That's a monumental negotiation feet, I would imagine, and, patience and psychology and all sorts of stuff that goes into that. How long did it take?

And You're right Veronica, you do say like, you only need 75%. My perspective is probably a little bit different, and I'll challenge that for this reason. as an acquisition specialist, you do still need a hundred percent to develop the land. You know, it's, it's. That's how you get there.

So you can't turn soil until you have a hundred percent of that strata scheme. So yes, you need them to control the property and to commence strata in your proceedings in the land of environment court. But you do need a hundred percent to turn soil, and I've always taken the view that a hundred percent.

~Um, and, and like reputational impacts and, you know, for.~

CB: when you're sort of like winding it back, 'cause then now you're at the point of putting a deal together, right? And you're starting negotiation. You've really. Narrowed in on this site, but you might be making multiple bets. Like I've got a 20% chance of pulling this one off, so we'll try and we'll try this one and whether I can get there, you know, you can't just put all your eggs in one basket.

But now the change is obviously happening in New South Wales. Like, you know, are all developers though, have we got an under, firstly, is there a lot of people like developers in this space, like, or is that a bit of a fallacy? Like, and two, they can actually wanna build and have got the capability of building.

~Um, ~and two, is that taken away a lot of the bargaining power for the owners though? Because then they're saying, well. Look, you know, if you guys don't agree, don't worry. I'm gonna do it up the road to that lot and you're gonna have apartments in your backyard. So like how has that changed it for you?

Ryan: I probably can't emphasize the change enough, like how much the market. And the environment,~ um,~ has changed over the last 12 to 18 months since the premier announced, you know, significant changes through the LMR reforms. ~Um, ~and more recently the HDA, you know, you know, the Housing Delivery Authority, that's been an absolute game changer in terms of supply of, homes in New South Wales.

~Uh, ~you know. Just trolling through zoning maps, trying to look for maybe two houses that still another acquisition person hasn't noticed. that was my life. And you're trying to sort of, you know, ~uh, ~break through. And then you look at a suburb like Rose Bay today heard an incredible statistic,~ uh,~ uh, recently that I think, you know, some 60,000 square meters of gross floor area has sold there in the last 12 to 18 months.

If you say 60,000 square meters at an average of a hundred, you know, that's 600, a hundred square meter unit, that's 600 units in Rose Bay. And if I, I'll go back two years ago, I couldn't find two homeowners that wanted to sell, you know, next to each other at the same time. ~Um, ~and I think, you know, that's,~ uh,~ it's just incredible statistics coming out of an area like that.

and I think my peers in the industry would tell you they are completely surprised that Rose Bay was included as an LMR area, The infrastructure constraints and the, the amount of traffic. But it is what it is. And the, you know, the, the government already decided to include an area like Rose Bay, and all of a sudden the tap was on.

There's beautiful heritage conservation areas with homes that have been untouched, streets, which are untouched and they're sort of beautiful federation homes, all of a sudden being rezoned for,~ um,~ development that might accommodate 4, 6, 8, 10 story buildings. ~Um, ~and, and councils in those areas in, in uproar.

But developers moving very, very quickly,~ um,~ to do that. And I think, you know, what's been a, a key thing for me that I've just sort of seen over the years is like how social media has. Enabled, you know, announcements like these to get out so quickly. when I think back to when I started in agency, some 14, 15 years ago, we would look at zoning maps.

It got announced by the Premier and the, and the planning Minister Scully. ~Um, ~and we like that weekend there was news cameras like in Pley Avenue, in, you know, in those areas. And,~ um,~ Agents sort of door knocking developers door, like instantly. And I called it, I called it the circus because it was like the circus had come to town.

~Um, ~and all of a sudden it's developers crawling over all over each other to find sites. So I think there's been that, huge change. And you know, I've always had that saying, you've gotta look at a hundred sites to find one. That statistic like now you can find a hundred sites so much quicker.

'cause there's so much more supply in the market. Like to your question and to your point. So it's gone away from like trying to find this really special site to, you know, which site do I actually want to buy because it's not gonna get built out by another property in front of me or another development.

'cause all rezoned around you. So it's just changed the dynamic completely.

Three, four? I mean, what sort of multiples are they getting for these properties?

Ryan: You probably, you, you probably are talking about twice the day of the property. ~Um, ~I'll be up in shore to, if your, if your property, you know, it might be a four bedroom house on, you know, a thousand square meters and it might be worth three and a half to 4 million, like to be, you know, you, you're getting offers of eight, eight and half nine, like off the bat.

And you know, for the listeners, developers are looking at what the planning controls can allow on your property and they're simply working back, how many apartments can I achieve on that site? What are the values? Those are PA, that are concerning for, and then deducting their cost to deliver it, essentially to give a profit margin.

That just makes that margin want to pay less than that amount to increase your profit margin. So it's working with the landowners,~ um,~ to try and find what that sweet spot is. Now that's a lot easier to do in these rezoning areas where they've been trying to sell their house perhaps, or they've been thinking about this own their house for $4 million, but all of a sudden, overnight to a developer might be worth $10 million.

So a developer might go in and say, well, can I sort of pick it up for seven to 8 million? So it's a premium to the. Landowner, but it's really good for my,~ um,~ profitability. That's where real estate edges come in and say, no, you can sell for $12 million, sell through us. And if they get $10 million, they're still incredibly happy.

So there's those sort of gains in the marketplace. So developers have agendas, agents have agendas, landowners have agendas, and we, you know, we're dealing with the, you know, the incredible, um,~ um,~ mid studies, you know, called the market,~ um,~ to try and do deals. ~Uh, ~it's quite phenomenal.~ ~

So are you finding that that's compressing and better for the developer? Not so much good for the homeowner. Because they're going, well, there's not really a scarcity of sites and if I'm comparing your site's not that great, but I mean, there are always gonna be sites that have got the view that are never gonna be built out backing onto the park.

Like they're the ones who can really demand a real premium. But do you find that, you know, just an average site in the suburb isn't gonna get this premium because there's just so much choice for developers now. ~Um, ~so. It's not gonna be like everyone in the suburb wins. It's gonna be the ones with the real amazing, some unique sight.

Ryan: I ask myself the same question and I, I try, sort of try and think about this, this stuff, but you gotta put in perspective, like when the Premier announced these changes and the planning minister announcing changes, they're talking about. A number of housing, like they're talking about increased housing supply over 15 years.

So, you know, the. The government has no qualms about someone is winning. Now they, in fact, they want owners to win now, but they don't have any crimes out. The landowners not winning now because things might settle down for the next 12 months now. What I've seen is every developer that's needed to buy site to keep staff employed, to keep, you know, like their building arm sort of going, they've all bought sites 'cause they need to replenish their pipeline and build up their pipeline.

You've seen a lot of those developers with those sort of needs already acquired. So they got in quite quickly 'cause they're like perfect. I've been looking for a site for the last 12 months in Mossman and now Imma, but now the whole suburb has been rezoned. So now I can find one. what, what we're seeing now is a tapering off of activity and a tapering off of transactions.

But I think you sort of gonna see now the ebbs and flows of the market. You know, things will change, interest rates might go up, and then, you know, developers like, sort of pull back a bit, interest rates might go down, developers like, yep, the tap's turning back on. So there's so many factors as we all know, as to what influences,~ um,~ developers sort of, you know, buying, pulling back and things like that.

VM: It's a fantastic perspective and it is interesting to think that, you know, that there was this flood of activity and then it's now we're sort of sitting back and will maybe normality if, or the new normal perhaps, is what we're gonna see. But obviously, you know, developer, once they, secure a site, they've got one opportunity to maximize the return on that site, right?

Ryan: That's such a good question. 'cause now you're getting down to like really the, the crux of. How a developer thinks. And this is where it gets really fascinating because you know, if I can sort of take everyone into the mind of the developer when, you know, or, or, or my mind sort of going about a new deal or trying to originate a new deal.

Like, you know, I, I try and see every deal, like a blank piece of paper in front of me with a landowner. And I'll say this to landowners, like, I've got a blank piece of paper in front of me. We can, create whatever sort of deal framework you want to because everyone think, selling a property is quite rigid and robust.

'cause we've all, you know, if you've bought. An apartment or a, it's a standard contract and you know the terms of the terms and it's in a six week settlement, you might have a three month settlement. But in the development world, I think like where it gets fascinating is, you know, lawyers are great at sort of helping a developer to carve out or structure any deal they want to.

You know, I don't think stories is enough. I, I do believe it's probably because it's on the proof roof of the town center. It should be 12 stories in. And they wanna take a longer term view and they wanna challenge the planning controls with, you know, the largest deal with the state government. You know, then they might look at a different sort of deal.

So they say the landowner, you know, you're zoned for six stories, but you know, we want to get more. And you know, we want a flexible deal where we're gonna try and pursue more upsides through planning and use our expertise to navigate the planning system. Go for more and you know, we'll pay you more of a premium.

So instead of like two times your value, we might pay you two and a half to three times your value, but that developer knows in the back of their mind what they can potentially get. And if that developer structure, something flexible with the landowner and say, look, give me three years to do it.

And if I don't get what I want approved, I can walk away. and I'll forfeit the 3% that I've paid, you know, that I've fed you, and then the landowner might come back and say, I'll do that. But it's gotta be 2% per year, every year or 2% every six months. then it's on, right.

And once you've got that engagement with landowners. you can dream up the deal together and it's very collaborative with the landowners. 'cause you've gotta work out what works for both sides. And then they, all three years is too long because, you know, we're an elderly couple and we, we, we simply can't of, you know, do that.

And then the developers, like on the back foot, there's a deal there that, you know, can I do that in two years you know, then I'm, then I'm stretch and then we go, well let's do three, two years. And then if I need a extra year extension, I would put it down another 5% at that point in time. or they'll pay you an extra million dollars for an extra year.

there's no one formula. It's an incredibly creative space in the deal world when it gets to that point.

Like it's so difficult and like where does it go wrong? 'cause you look at these sites and it's like. It's not always a perfect rectangle. and then sometimes there's an alleyway attached and it's like that person held out. so like where does it all sort of blow up? Is it the owner getting greedy?

Is it developer going in too hard? Like where does it fall out? And do they really know that their site, sometimes the key site, like you might know it, they don't know it. And should they be asking for more money? Like so there's so much going on here for the owner that I just wonder who's even helping them.~ ~

Ryan: ~uh,~ great question. Like the landowners in areas where you're zoned for apartments, they are often getting approached by developers and real estate agents quite often, and I think you said earlier in one of your questions like, is there as many developers out there as we think like.

So the agents like to get involved, you know, local agents are fantastic and they'll get around and they'll, they'll build relationship with people and say, you guys are zone to do townhouse apartments. It's the three people together. So. Landowners are a lot more educated than you would think, like particularly in these areas because of the approaches they get and they gather information over time.

I actually always find it easier when landowners are educated, and I know the, question that you're asking the Tony you're asking in this right way, it's like, can they be difficult? Can they be. You know, like how much do they actually know where? I think sometimes a little bit more education is a good thing because what I've found in experience is sometimes you go in there and you spend a lot of time.

It could be you might spend 12 months educating someone on what a option agreement means, what the deal structure means, and talk to your solicitor, and time kills all deals. So. if you're the educator, then another developer will just buy pure, like come along at the right time and go, Ryan, you annoyed, you're an, you're annoying me because you've told me that I can't do this sort of deal structure.

Absolutely, that's all I wanna do. And, you know, it's often about timing, but they tend, they tend to have a good feel of like, you know, are they the middle property between like a, a group of three or four? Like, do they have leverage and things like that. ~Um, ~but at the same time, if they're getting a good upside, they typically, you'll typically see that they're not trying to.

Be super greedy. ~Uh, ~Uh, and I'll try and sort of just realize a premium as soon as possible,~ uh,~ like there's absolutely, there's people that are beyond greedy and, you know, they, they, they like to get in the way and they like to have, all the cards and, you know, I've got enough experience,~ uh,~ personally that happens and you move on to the next one.

Like I said, you've gotta look at a hundred deals to get one. So if you, if someone wants to dig their heels in, it'd be difficult. I'll, I'll leave that to the next car.

VM: which is a problem for the other owners, isn't it? 'cause they're stuck with, you know, bugger lugs up the road. Who, who's a total deal killer? ~Uh, ~we actually, I bought,~ um,~ three houses some years ago for a,~ um,~ a client was a nursing home and they wanted to extend and they, wanted four, ~ um,~ the one that they wanted the least was the biggest pain in the neck.

commit or the, the last one to agree meant that he had the greatest leverage. And, you know, if we really needed that was a real problem,~ uh,~ negotiating with someone like that. But if you can't walk away, a nursing home can't work, walk away, you know, they need to buy next to their existing facility.

Whereas the developer obviously can, they can say those other sites. So I love that. It's quite funny.

A lot of 'em got burnt, a lot of 'em went, you know, some went under, I dunno how much actually went under. Do you feel like that There is quite a lot that will shift from other states, you know, go from building. Greenfield estates or high resi, high density resi in the fringes and or you know, instead of building Western Sydney, they build in upper North Shore.

Like, do developers just look at it and go, well, I know we'd love to build in this. We've got experience here, but we're just gonna shift no matter where it is in the country. That. We can actually make a profit right now. ~Um, ~and people will be surprised about all the new entrants in, say, the Sydney market.

We're talking here. That'll come because they can make, you know, feasibility stuck up.~ ~

Ryan: ~uh,~ it's really interesting, you know, over the years I've spoken to developers in different parts of Sydney as to what they're looking for. And, you know, during my agency. Days I'd sort of trying to iron out with what they would buy. And, you know, is it greenfield?

So they might have, a big focus on apartment development in more inner city locations. And at the same time, in parallel, they might sort of like do subdivision development and, and sort of buy land, you know, out in the western suburbs and look to, you know, subdivide because that can be quite a, a, a lucrative business.

~Um, ~you know, that subdivision sort of buying old lands that are being rezoned or, you know, whether it's serviced or not serviced. And then, you know, like the ability to sell. through stages and in a structured deals where you can sell through and then, you know, there's house and land packages and you know, you're sort of not getting involved in the delivery side and the delivery, the focus is on,~ uh,~ the apartment,~ um,~ side of the business.

there's a lot of that. Developers from Melbourne have always, you know, from, from my experience,~ uh,~ they've always found it a little bit harder to get their heads around construction costs in Sydney. ~Um, ~and looking at the percentage of land value to,~ um,~ total revenue in the project.

Where in Melbourne that, you know, land might be 10 to 15% of your total project value. you know, so they, they, they feel like there's a lot more fat at the, in the, in the feasibility, if you will, to, to put it crudely. But,~ um,~ you know, so they, that interstate sort of, you know, places interesting. A lot of the developers recently,~ uh,~ are going up to Brisbane.

~Um, ~so there's been a shift from Sydney developers, you know, are going up into Brisbane and you'll, you'll see a bit of. ~um, ~diversification,~ um,~ particularly because construction has been so hard in Sydney, and when you talk about people going sort of under, it's been a lot of the building firms go under, unfortunately,~ um,~ they just haven't been at five and they're probably,~ um,~ you know, committed to, to fixed price contracts.

Veronica: I'm on a personal mission to help more people make better property decisions. You know, most people don't realize that they can cost themselves hundreds of thousands of dollars over the medium to long term when they make property decisions without all of the information that they need. And what I do is help people with tricky real estate problems, which offer masqueraders simple questions like, should I sell my investment property because the interest re payments are hurting, or should I buy before I sell?

Or the other way around. You could connect with me and access all of the tools that I've created to help you make better property decisions at Veronica Morgan dot com au. And there you'll find resources for first home buyers, details about my buyer's agent mentoring program. You could connect with my Sydney based property management and buyer's agency teams, Australia wide vendor advocacy.

Or ask me for introduction to the small group of buyer agents that I would personally recommend across the country. That's Veronica Morgan dot com au.

Please go to cove.com au to reach out.

CB: I mean, yeah, obviously there's ~uh, ~you know, developers, right? And then there's builders, but there has been a bit of a move, right, for developers to sort of partner with builders as well, right? And like actually bring building in house because that hasn't been great for the developers, right?

Like often that, you know, the, if the builder goes under, it's not good for their developer as well. Like, is, is that the trend? Do you think that we're heading more in that way and you're gonna see a lot of builder and developers partner up?

Ryan: Yeah, it's a great observation. There's been a, massive push, I would say, towards developers bringing construction in-house. ~Um, ~the reliance on external builders has,~ um,~ been something that. Developers are sort of trying to, to move away from, and that's, that's for a multitude of reasons.

And the developer wants, you know, to be,~ um,~ squared up and, and paid more than what the, the contract may have been to move on because otherwise they're losing. So, you know, development, it is like, ultimately it does sort of, you know, you want it to be win-win for everyone involved, right? And that's when things like end amicably and, you know, that's, that's, you know, you wanna see everyone winning in, in.

A project. ~Um, ~but so a lot of developers looking to bring that in-house and have more control over that. ~Um, ~then they're not just biding with the, you know, with external, they're sort of working it through themselves internally. ~Um, ~so that's been a, that's been a big shift. ~Um, ~and you know, to your earlier question, some of these groups that operates build a developers, what I've seen and what I've noticed is since the Todds have been announced, since the lrs have been announced, I've actually seen a migration of developers from some of the Western suburb.

Tier and those western suburb builder developers, all of a sudden, you know, looking into those areas like, you know, might be the lower and north shore of Sydney or the, you know, even sort of trying to get into parts of the, the, the eastern suburbs of Sydney. So there's been that migration from out west of the builder developers because they can build cheaper than everyone else.

They can still build a good product, but when you're building cheaper than anyone else, you are acquiring a lower cost base in your feasibility. And when we speak about revenue minus cost, residual land value, they're actually building for less than everyone else. So they're in what they can pay for the land.

CB: I mean, I think the consolidation of builders, right? That's your, the mercy of that, right? Like. You know, if you're had too much exposure to resi, maybe you went underwrite and you had a couple of bad jobs, but if you had like doing, building some schools, I'm building some hospitals, I'm building a bit for the universities and maybe you weren't as exposed or, or you had a cost pass like, ~um, ~contracts and, you know, have you seen that, that the ones that you know, went too hard down a resi route have sort of.

Ryan: I've

seen one of the more prolific,~ um,~ builders up in South Queensland. I won't name who they are, but you know, they're definitely one of the more prolific ones. You know, I think when, conversations I know have been had with them about, you know.

Would you do like a residential project? And they've, they,~ uh,~ previously were focused on residential, but they've,~ um,~ either shied they, they've shied away from residential and they've more focused on government and,~ uh,~ with contracts and things like that. And with the Olympics coming up there, you know, the focus is, is on that.

And, you know, that's, that's great for the builder, but you know, in terms of the market and the development market for residential and put more pressure on. The residential market because there's less built, there's lot less building in the marketplace. And when there's a prolific builder, you know, that takes out a chunk of the market in terms of who, who can actually build it.

And I wanna put this like to your listeners as a, as a example, if you can visualize this so, you know, pre LMR, we're going back sort of 12 to 18 months ago. Let's draw a horseshoe from Mossman. Mor right around to Rose Bay. And if you draw a horseshoe coming out the upper bridge and think about all those suburbs, I think if you're looking at those developments, which were typically, they were say, let's call it on average for multi-residential, 10 to 40 apartments.

I gathered example of Rose Bay alone, 600 apartments where previously before El Ma, probably 60 apartments, a sale in Rose Bay maximum. And all these, like those eight builders were probably doing those eight projects. Now what we're gonna see is all this land has transacted and it's all transacted on 24 month settlements.

So it, everything's gonna settle in 24 months, and every developer's gonna need to look for a builder if they don't have that in-house. So those eight builders. they need to build all of that. That's Rose Bay alone. You know, 600 units. They've gotta build right through to Mossman. Where you gotta think, Mosmans been Ned Neutral, Bay's been rezoned, Creon, Kamare, rose Bay, double Bay Edge, cliff Darling Point.

So I think that's gonna be quite fascinating to see what happens there. And that's why I was just talking about earlier, there's been a, a shift from developers being just pure developer model to and what integrated model where they have builder,~ um,~ cap building capability in-house because. I, I think everyone knows this is coming, and I do speak of it with, you know, people in the industry, but it's quite fascinating because there's one thing you can't do and that's create builders overnight.

You know, so it, the start of building, you can't just, you know, it doesn't like just to find manpower. To find the labor, to find, yeah. You know? Yes. You, you can see guys like sort of seeing you guys coming out of a building firm and wanting to start up a building business, but between, you know, Having that idea and actually getting on site there, like there's obviously a big setup and finding the right people to do that.

And so you need to have a skill set that can deliver a a quality products gonna sell for the sort of price to make all this stuff stack up,

Ryan: I say this for a reason because it goes back to some of the first questions around like, what are the key things you're thinking of when you're going into a deal today? I'm trying. To give a really broad sort of view of everything that needs to be considered in a marketplace.

'cause the thing that's going on is everything that I need to consider in a feasibility when I'm assessing the value that I can pay for a site. So all of these things I speak about when you have a feasibility. There's a line item for all of these things. So when I'm looking at sort of like market fundamentals, I'm looking at dynamics, I'm looking at supply and demand of, of, you know, both apartments, but you know, even builders.

So the. There's allowances that you may need to make in your feasibility if any of the listeners are looking to buy their own development site, you know, to allow for escalation in pricing costs and things like that come in. And then, you know, you might say, well, at the same time, you know, Chris gave me an example of Roseville.

What if there's a lot of apartments coming through in Roseville? You might escalate construction costs, but you might have to put a sensitivity scenario on your revenue because if there's gonna be eight different projects available in the same street in Roseville, you've gotta compete against each other.

And if they all have 80 apartments in those projects, Are there 640 purchases ready to go across the projects? You know, so you might

But,~ um,~ I, we haven't ended up getting, getting anyone on who's from the sales side yet. And, you know, I'd love to get someone like SRM on, which we probably will. And yes, people actually are selling, seeing the number of buyers. Right. I, lots of different developers 'cause I'm not sure whether there's enough bias for all these things as well.

Right. And can they get finance for these things, you know, because it's finance is hard. ~Um, ~but like when you're buying that site. I think your options and like, I don't know any of this stuff, so is the option to you have to settle if you get council approval, but what happens if you get council approval but building prices go up 40% Again, like can you walk away from the site?

Ryan: back to like probably our deal structuring conversation we had a little bit earlier. This is where deal structuring for a developer can be used as a protection mechanism. When done wrong, it can also put you in a lot of, like in, in a world of hurt ~and, and,~ and pain and trouble because you're locked into an unconditional deal.

So a developer. If I talked about an ideal scenario or a bit of a wishlist,~ um,~ and I said to the developer, what sort of dealer do you want to do? They would always start with, I want conditionality. I want time, I want low payments, and I want the, I want the land as as cheap as possible. On the other end of the spectrum, for your listeners, if I was a developer that wasn't sort of super savvy and I was just like, I just want my first side, and I'm not really thinking, I just want, I just want the land locked in.

And that's where the, like, that's where a conditional deal will cost you more. So that as a developer, you, you, you better hope you get a little bit more out of the planning or you better hope that the market moves But if it's unconditional, then the developer's locked in. So, to your question, it's not. So much da there, there is, there is like the basis, you know, for a subject to DA type deal. So you, you, you can say, you know, subject to the council approval, I'll, I'll settle, you know, 14 days or 30 days or 45 days after the council approval.

~Um, ~Um, but again, there's no, there's no sort of one particular way. ~Um, ~so conditionality is really important, particularly for,~ um,~ a deal. Like if the, if the market is move, it's gonna move or move backwards or construction costs increase. Because it gives the develop developer flexibility. If it's unconditional, you are typically, you, you will sometimes see a developer go back and say, look, I know I'm in a gun unconditional deal.

You can amend the contract by a deed of variation to the contract and say, look, the landowners agree, instead of taking $8 million, they're gonna take $7 million. ~Um, ~and the developer's gonna, you know, release an extra, you know, 3% deposit or 5% deposit, or, you know, something like that. ~Um, ~or ~they, you know, they're gonna give me, you can, whatever you want.~

~You, they,~ they're gonna gimme an apartment at the end of the project and I'm, instead of $8 million, I'm gonna take $2 million and I'm gonna keep a unit ~like you can. There, there, there's,~ again, in this world, ~there's, ~there's deal creativity that you can,~ uh,~ that you can work with.

VM: So in a situation where you've had ~these,~ these blanket rezonings, it doesn't automatically translate into they're gonna be able to get the development approved. So obviously that is still another hurdle in the whole process. Right? Are they finding it easier to get developments approved than before?

They're, they're still the approval authority. ~Um, ~so. That's something that a developer needs to consider. What's happened is with the Todds and with the LMRs,~ um,~ the earlier that a developer was buying to those announcements and those changes being implemented, the more risk they assumed and the more condition wanted.

In the, in the contracts with the landowners, they're saying things along the lines of landowner. These are really new planning changes. These are brand new planning reforms. no one's got a development approval under these reforms. We're gonna be the first, we're pioneering in this space.

~Um, ~they're untested at council. So we need a conditional deal where if we don't get the DA approved, we can walk away. Or importantly, if we don't get as much density as the planning controls say on paper, then we want to have an adjustment price in the contract. So we want to get, like, we want a mechanism.

it is actually one size fits all in that, in that regard. So like a town plan would tell you if you had them on that. It's really important to,~ um,~ sort of assess your individual sites on its individual merits because, just because an FSR, which is a floor space ratio. 2.2 times your land area, you know, is your control.

CB: what's your belief on the number of, like, is there enough buyers for this stuff? Like, yeah, I know you're working at a big, I don't wanna give you insights for them, but just your broad perspective. You know, like, has it been tough going, I know the government's, you know, you mentioned the housing delivery authority.

Obviously that was a. A lot around trying to speed up this approval process. But there was also that pre-sales guarantee helping developers, if they do pre-sales, the government would step in if they haven't got the nut pre-sales. Like do, do the big developers, if they're building like a really good quality product, have they got a lot more buyers than properties or is it really quite hard for them to still shift it?

~Um, ~because you're talking four, five plus mil, often the purchase price on these things, ~um. ~Well, you know, even if it's three, it's still tough in this market, right?

Time is a really important factor and developers will need to allow upfront and assuming their feasibility. How many apartments are gonna sell before construction? We often call presales, and that presales relates to like getting construction finance from the bank. ~Uh, ~and then we talk probably about, you know, balance of sales, you know, during construction, like during the construction period, like how many apartments do you think you're gonna sell?

And then there can be residual sales post-construction. That's not ideal for a developer, but there might be other units still, you know, still available for sale post-construction. And you'll often see developers advertising for, you know, building finish moving immediately. So there's all different scenarios and there's the different market overlays.

~Um, um,~ so, you know, there, there's been sort of different things, but people often say that, you know, when interest rates are going up. get into the ultra premium market because,~ um,~ that those people are cash buyers, you know, at 10 million plus, like 10 to 15 to 20 million plus.

So sometimes that's a good space to be when interest rates are going up because they've got the money in the bank. They're incredibly wealthy people. Interest rates don't affect them as much. They affect the know the average Joe, like myself. ~Um, ~and Mid markets sometimes when there's, more activity from foreign,~ uh,~ like countries and stuff like that, looking to invest into Australia, that can be incredibly good markets to be in.

So I think,~ um,~ you've seen the, the rise of the build to rent developer as a result of this. A lot of developer. Bring that rent sort of lens over it. And you've actually seen some of the, the big more institutional developers like sort of have BTR projects. Now those, some of those projects, you know, I know for a fact started as build to sell projects and then they got rebranded as BTR, not because they wanted to keep them, but because they potentially couldn't sell more.

So then they convert 'em into BTR put sort of, you know, like great, you know, rental units in these great projects by these, by different developers. And then they sort of hold it. But, you know, but that, that being said, that that sort of happened early on. But now BTR is becoming more and more of a exciting, sophisticated space and a lot of developers are actually pure BTR focus.

But, ~um. ~I understand they're, they're sort of still working through structuring and, and, and sort of tax relief and all sorts of stuff to get that get that model really working in Australia. So there's still change required there to make that perform, but that would definitely help bring sort of housing supply and housing affordability,~ um,~ yeah, it's been interesting.~ ~

CB: ~um,~ Adam Hurst on years and years and years and years ago, way before he started Novus, when he was at Mirvac. And you know, Murdoch was one of the firm's, you know, developers I guess you'd call it that went in down and just built to rent. And they're doing lots of great projects now and, ~uh.~

He's got his own build direct company now and ~um, ~yeah, it's, it's very crazy space, but it's, you know, it's gonna be hard for them to build any type of scale that'll move any affordability metrics. We've got 11 million dwellings, but it's definitely one of those things that is part of the solution. ~Um, uh, uh, ~Ryan, thanks such for coming on.

I mean, I learned a lot,~ um,~ and I feel like I still dunno much in this space, so I appreciate you coming on. ~Um, ~it's a very,~ um,~ interesting part of the overall,~ uh,~ development cycle.

Veronica Morgan: If you have a question that you'd like us to answer in an upcoming q and a episode, you can send us a voicemail or written question via the website. The elephant in the room.com au. Or you can email us directly at questions at the elephant in the room.com

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