Maintaining Melbournes momentum

Queen Victoria Hospital and Federation Square maintain the momentum of Melbourne - and of KPMG Property, says Mark Holland*, adding: 'Many of the tenderers acknowledged the accuracy of our research and supply-and-demand analysis'

Progressively throughout the 1990s, Melbourne re-emerged as a national focus of property development activity. Underpinned by demographic and cultural shifts favouring the inner city, and also by a new air of confidence in the southern capital by national investors and developers, some impressive projects were notched up during the decade such as Crown Casino, CityLink and Docklands Stadium with a combined value of more than $4 billion. Other notable projects included the redevelopment of Beacon Cove, the completion of the Park Hyatt and, imminently, the Westin Hotel. Concern that Melbourne's development push might end has been allayed by the progress of Federation Square, and the appointment in December 1999 of Grocon Ltd as the preferred tenderer for the Queen Victoria Hospital site. Both projects front the city's civic spine (Swanston St) and both confirm Melbourne's development phase will continue into the early years of the new century. But also important is the fact that each of these projects engenders a vision for their respective sites - and for the city. And in both cases, KPMG's Melbourne property group has been instrumental in either shaping the vision or in making the deals happen.

Federation Square is being developed by the Victorian Office of Major Projects and will embrace a range of cultural and commercial uses. KPMG director of the Centre for Consumer Behaviour Ross Honeywill has helped formulate the concept for the commercial space at Federation Square. The traditional approach is to cast about for expressions of interest from likely tenants. Honeywill reversed the process, asking consumer what they valued and wanted, and then negotiated with retailers who matched these requirements. The Melbourne City Council engaged KPMG as financial adviser to guide the tender process for the sale of the QVH site. Corporate finance director Mark Holland led an in-house team of property advisers in scoping the market overview and uses for the site. "A range of uses were researched", said Holland, "hotel, office, retail, cinema, student accommodation, carparking and residential apartments. But most pleasing is the fact that many of the tenderers acknowledged the accuracy of our research and supply and demand analysis."

KPMG's primary role was to prepare a property information memorandum which identified planning and development issues (within the context of council's planning objectives), and to report on supply and demand matters for possible site uses. One of the ideas put forward by KPMG was for an "urban village". The recent rise of CBD-living also supported demand for homewares and convenience retailing on the site, added team member and KPMG director of the Retail & Property Group Bernard Salt. The KPMG team prepared a detailed financial analysis of the viability of the proposals by short-listed bidders, and considered the economic benefit of each to the city. This latter element considered the provision, development and maintenance of public open space, and the likely net additional rate revenue to be derived from each proposal. Winning bidders Grocon proposed the concept of the Queen Vic Village, which includes a range of uses including a 33,000sq/m retail element sympathetically configured with the city's lanes and arcades. Convenience retail requirements will be met, as well as the need for apartment-based homewares, some fashion, outdoor cafes and dining, and entertainment. The submission by Grocon explains "This is a development concept that acts to enhance the charming and delightful lane-ways of Melbourne with a modern and contemporary edge". Indeed, the Grocon concept offers the right blend of design and land use to meet the needs of residents, enhance the site, and add yet another dimension to Melbourne's vibrant and growing city heart.

Brian Ellerbeck, head of KPMG Corporate Finance's Property Group, notes that these projects reinforce the group's leading advisory and deal making capability, and demonstrate the range of property related disciplines which KPMG brings together under the one roof. These include substantial expertise in property valuation, feasibility analysis, structured finance, consumer behaviour and demographics. The group has been involved in a number of other significant Melbourne property deals, including that of financial adviser to the Consortium currently building Colonial Stadium; financial adviser to one of the Consortia currently shortlisted for the development of the Comtechport precinct at Docklands; and financial adviser to RMIT in connection with the construction of student housing on the old CUB site at the top of Swanston St

* Mark Holland is corporate finance director for KPMG Property. He may be contacted on (03) 9288 6589

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