Defaults Central Equity powers onfaze Kutner

The man dubbed ‘Mr Southbank’ has delivered $114m in profits to shareholders in his Central Equity development company.

Central Equity chairman Eddie Kutner. Picture: Kylie Else.

The man dubbed “Mr Southbank” because of the proliferation of his projects in Melbourne’s riverside precinct has delivered $114m in profits to shareholders in his Central Equity development company and laid out bullish expansion plans as the residential cycle picks up.

The Eddie Kutner-led Central Equity, which has more than $3bn worth of projects under way in Melbourne, has revealed another year of profitability as it defied the broader industry malaise.

Central Equity is billed as Melbourne’s largest private residential developer, and took bids in 2016 for its business as it targeted a $1.5bn-$2bn valuation.

The developer, which has built large-scale apartment complexes in Southbank and has a vast development pipeline, had a year ­earl­ier shelved plans for a float.

The company’s continuing good fortunes mark it out against smaller operations that have not been able to fund new projects and some suburban operators that have hit the wall.

Central Equity’s operations are surging as it is prepares a ­series of new apartment and land projects without the fear of defaults in inner-city precincts that saddled the industry.

The company said total shareholder group profit for the 2019 ­financial year was $114m before tax and $79m after tax, a slight dip on last year’s reported $90m. The gross operating revenue of the shareholder group was $541m.

Southbank Place, a $425m apartment project, was completed during the year as well as several stages of its land sub­divisions.

Central Equity directors Mr Kutner and Dennis Wilson told investors that strong population growth, demographic changes and underlying demand would underpin prices, particularly as first-home buyers were also being encouraged to enter the housing market. The pair were upbeat about the Southbank area that lenders had shied away from when unit prices were dropping.

“Central Equity projects are enjoying very low vacancies, ­resulting in effectively full occupancy. The low vacancies are ­underpinning the rental market and providing solid and recurring rental returns,” the company ­report said.

The company warned that ­demand was still being hindered by delays in credit approval times and in many cases the restriction of available credit.

“If affordability and credit availability was improved, the pent-up demand would be acti­vated and the pool of buyers would expand,” the directors said.

They also said planning changes and additional financial imposts levied on the residential property market by all levels of government and stringent developer bank financing requirements, were restricting supply.

“Of those apartments in inner Melbourne under construction, it is estimated that the majority have been sold,” the pair wrote.

Central Equity plans to step up its production at a time when a ­series of rival Melbourne CBD projects have been dumped in favour of more lucrative office projects and some Asian investors have shied away from kicking off projects, partly as the industry deals with the cladding crisis and widespread building defects.

“Opportunistic developers have retreated from the market place, many either reselling their sites or abandoning their projects. A number of previously permitted high-rise residential sites have been recast as commercial, further reducing future supply,” the directors said.

They said that as projects were completed there would be a “considerable” reduction in supply ­because of reduced starts.

While noting this may drive a shortage of supply “in the not too distant future, further heightening housing affordability issues”, the company has kicked off the 50-level Focus Melbourne Apartments in Southbank with building works to start shortly.

Real estate agency JLL said market sentiment in Melbourne’s apartment market was up over the past quarter, reflecting lower ­interest rates and easier credit growth. The agency noted the ­recovery was becoming evident in lending commitment data and positive price growth for existing dwellings for several months.