SUN STILL SHINES FOR DEVELOPER DUO
Written on the 9 May 2011
IN less than two years, the entrepreneurial pairing of Adam Lacey and Chris Bolger (pictured L-R) has netted more than $12 million in developments.
At the height of the property slump in 2009, Lacey and Bolger were two of many to be made redundant at Sunland Group, but they wasted little time in founding their own development company.
“Chris and I were both talking on the same day we left Sunland and decided ‘let’s give it a crack’,” says Lacey, 31.
“We both have different strengths. I was a development manager in the housing division and Chris was in the finance side of things and it seemed a pretty good fit.
“It was a pretty tough time so we took the view that we had to focus on product that was just as affordable as we could make it. There are still good projects out there and if you’ve got a good project the banks will still talk to you about it.”
After searching through ‘hundreds’ of opportunities, the duo identified a 12-townhouse development at Eagleby as their first venture. The strategy of building entry-level product paid off. The $4 million residential project was entirely sold before the October 2010 completion.
Bolger says securing funding was an arduous task.
“We were two young guys who didn’t have a track record with the bank and we were rocking up looking to borrow a couple of million bucks for this development when everyone else was in receivership or struggling,” he says.
“We worked really hard with the banks for probably four and a half months in order to get that one deal across the line. Now that we’ve got the track record, we’ve performed well and the project actually exceeded both our expectations and the bank’s, on the second one we’ve gone to get funding and we had three offers from three different banks within four weeks.”
The backing of their second project is a glowing recommendation of creditors’ faith in the young guns, with civil works recently starting on Onyx’s $8.6 million project at Ormeau.
The 12,000 sqm project comprises a $6.5 million, 17-lot townhouse development within a $2.1 million land sub division.
“What we’re trying to do is develop to where the demand is. That demand in the plus $500,000 mark is gone. It’s really difficult in that upper bracket, valuations are hard and banks don’t look as favourably at those projects,” says Bolger.
“The other things that supports our under $350k price point is rental returns. We’re getting a dollar per hundred pretty much on all our products. When you start going up to plus sevens ($700k) that rental yield starts dropping and it’s not backed by that same income stream that gives investors the confidence to jump on board.
“We acquired Ormeau in September 2009, it had a preliminary approval on it but we weren’t happy with it so went about having it changed. It has taken a little bit longer than we would have hoped with a few council delays, but it’s not ready to roll.”
Earthworks at the Ormeau project may be fresh, but Onyx is already scoping the market for the next development and hints that it could be up to 40-50 lots at a value of $15 million.
The rapid growth has driven the need for stronger control mechanisms and a new business entity Onyx Construct has been created to bring the construction sub-contractual processes in-house.
Simon Cassar was appointed to manage the operations of Onyx Construct. He is the third staff member, but will soon oversee dozens of sub-contractors when the housing construction works start at Ormeau in August.
“Building costs are obviously one of the major costs you’ve got to cop when undergoing a project and we identified that we could control that. Otherwise we’re left open to more environmental factors,” says Lacey.
“We’ll still definitely oversee everything but as part of Simon’s role as construction manager he’ll undertake many of the daily operational activities.”
The Ormeau development is due completion by July 2011. Bolger says it’s still a hard market, but Onyx is again confident of selling the entire project before work is finalised.
“No matter where you’re at, you still have to work hard for your sales, but the product we’re delivering is a good one. We’re pretty confident by the time we roll around that we’ll have them all sold,” he says.
Lacey says that while the Sunland experience proved beneficial, there’s no looking back.
“Being just the two of us, the decision-making processes are a lot swifter and flexible, but I think we’ve still used our Sunland background to manage projects in a very similar way,” he says.
“Everything gets signed off in the same way, we use many of the same consultants and we generally run things with similar processes.”