News

Risks and Rewards of Amalgamation

April 13 2022

Huge demand for Gold Coast real estate makes it an ideal time for unit owners to band together to amalgamate property and attract developer attention.
Risks and Rewards of Amalgamation

Huge demand for Gold Coast real estate makes it an ideal time for unit owners to band together to amalgamate property and attract developer attention.

Amalgamations aren’t quick and easy exercises, but there are big rewards for owners who get the details right – particularly given the insatiable appetite for new apartment projects in the city.

An amalgamation is where unit owners in a multi-unit block collectively agree to combine their properties to form a single lot and offer the holding as a development site or as multiple strata-titled units in one line.

Amalgamations have become more common on the Gold Coast where vacant development sites are lacking, particularly in central areas such as Broadbeach, Mermaid Beach and Surfers Paradise.

The popularity of amalgamations for unit owners comes down to the potential to sell for a higher price compared to individual market listings aimed at non-developer buyers.

This is especially true for beachside boutique complexes built in the 1970s and 1980s which are ideal high-density development sites. The older these complexes become, the more costly they become to maintain, which can provide further motivation for owners to sell.

Three Principles to Agree On

Before embarking on an amalgamation exercise, there are three main principles that unit owners should first agree on:

  1. Owners must ascertain if everyone is willing to sell.
  2. Establish a floor price that is higher than what each owner could sell to non-developer buyers.
  3. Owners must decide if they want to sell collectively on a price per entitlement, square metre basis or individually. If it’s the latter, owners must keep their negotiations with the developer confidential, otherwise they risk raising expectations among the group which could jeopardise the deal.

Owners should also beware of the pitfalls and have realistic expectations of developers.

The risk falls to the developer because they are the ones investing heavily in professional, consultant and development application fees, as well as initial deposits for owners.

Time is the other factor owners need to appreciate. Don’t expect an instant windfall or hefty deposit, however the rewards can be significant if owners are prepared to wait.

If you have a stake in a low-rise building that requires significant capital expenditure in the next few years, this may be the right time to consider an amalgamation to capitalise on strong market demand.

Reach out to Kollosche Commercial for a confidential conversation around your goals.

Subscribe to Kollosche news