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Central Equity Shares Dumped

Investors demolish $22m of Central Equity's worth.

Investors have dumped Central Equity shares, shaving almost $22 million off the value of the Melbourne residential development company after it warned it was unlikely to make a profit in the next calendar year.

After closing at $2.21 last Friday, the stock opened down 23¢ yesterday. With transactions at six times its daily volume, it plunged to $1.63 before rebounding to close at $1.90, down 31¢. The shares hit a high of $2.45 in July.

The company attributed the expected earnings decline to unsuccessful and delayed planning approvals, increased costs, a stronger Australian dollar, changes to the urban growth boundary and the introduction of a development levy.

Graham Middleton, a director of Synstrat Management and an investor in the company, said a "major contributing factor" to the price fall was the high fees being paid to the company's directors Eddie Kutner, Dennis Wilson and John Bourke.

Mr Middleton said each was paid more than $2 million. For a company the size of Central Equity, he estimated their salary should be about $500,000 each. He also questioned a death and incapacitation allowance that had an estimated $3 million value and would rise annually.

After unsuccessfully raising his concerns with the company, Mr Middleton believes he will have investor numbers to call an extraordinary meeting early next year to discuss executive directors' benefits.

A Central Equity spokesman declined to comment on the directors' pay packages and the share price plunge.

In its profit warning, the company said it was doing a strategic review and was seeking alternative property-related income.

"The only new project which is currently being marketed is Woodland Waters Estate at Mernda and even those sales will not be fully recognised in the 2006 year due to the adoption of the new international financial reporting standards," it said in a statement to the stock exchange.

Central Equity was listed in the mid-1980s and kick-started Melbourne's boom in high-rise living with developments at Southbank in the early 1990s. Aimed at investors, apartments were marketed in Asia and London.

Central Equity upgraded its standard of finish during the height of the boom after a range of criticisms.

Melbourne's apartment market peaked in 2002 and came off sharply when the boom ended in 2003.

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illegal serviced apartments

THE Transport and Tourism Forum, a hotel lobby group, has called for a national certification scheme to curb the proliferation of illegally operating serviced apartments.

The TTF estimates there are up to 2000 illegally operating serviced apartments in Sydney alone, and claims the problem is getting worse.

TTF national manager Peter Stavely said the property downturn meant many inner-city apartments were being let out for short-term accommodation, despite those buildings not being zoned for commercial use.

"The rise of the problem is a factor of softness in the residential market which means that individual owners or developers can't on-sell or lease their residential apartments," Mr Stavely said.

The AEA Grand building at 187 Kent Street in Sydney is one of those developments accused of illegally letting short-term accommodation.

The building is zoned strictly residential, but yesterday rooms in the tower were advertised on accommodation the website wotif.com.au citing nightly rates starting from $145.

Those advertisements were removed from the website following enquires by The Australian yesterday.

The top half of 187 Kent Street is comprised of strata-titled residential apartments.

The bottom half of the building operated as the Stamford Plaza Hotel until 2002, when it was zoned as residential.

The NSW Land and Environment Court allowed the rezoning on the condition the former hotel would not be used for the purpose of "serviced apartments ... serviced accommodation or the like".

Chairman of the owner's corporation for the top half of the building, Daniel Maurice, said apartments in the former hotel were being let out as serviced apartments, which affected long-term residents.

"When you have serviced apartments or hotel-like rooms operating in the middle of the residential strata it causes all types of problems," Mr Maurice said.

He said short-term residents were typically noisier and caused increased wear on communal fixtures such as the gymnasium and swimming pool.

The building's manager Con Kotis, of Australian Executive Apartments, said units in the lower half of the building were let out as "furnished apartments" rather than serviced apartments and as such were inside the law.

He said letting out apartments on such a short-term basis was legal if short-term residents were required to submit a residential tenancy agreement.

Mr Kotis said it was the "intention" of the building manager to require visitors to complete tenancy agreements.

"That's the intention, we have the management rights in the building but we don't manage all the leases," he said.

He would not disclose the minimum-stay requirements for the building.

Mr Kotis said the TTF was attempting to push "small players" out of the market.

TTF's Mr Stavely said under its proposal legal hotel and serviced-apartment operators would be "certified" to draw attention to illegal operators.

He said TTF would approach the federal Government to fund the proposal.

Mr Stavely said illegally operated serviced apartments disadvantaged legal operators as they faced lower fixed costs.

"We are seeing this problem in the Melbourne Docklands area, on the Gold Coast and to a lesser extent Brisbane," he said

Luxury Apartments - a reward for success

High life: Janeta Grant's new outlook is a far cry from the farm at Swan Hill.

Sweeping vistas of the CBD and Port Phillip Bay are fast becoming the yardstick of success as luxury apartments attract a broad cross-section of wealthy Melbourne buyers and people from some of the least well-off suburbs.

It sounds like the perfect marketing pitch, but Australand's national manager of apartments, Robert Pradolin, said a survey of buyers in Southbank's Freshwater Place revealed more than half considered their purchase a reward for personal achievement. While the bulk of buyers were aged 40 to 60, many did not conform to the image of a well-heeled professional looking to downsize from a sprawling eastern suburbs home.

Mr Pradolin said many buyers attracted to the Manhattan-style lifestyle were people who ran successful small businesses, and some were from working-class suburbs.

The survey revealed Freshwater Place buyers had come from 64 suburbs across Melbourne. It was a trend repeated in the neighbouring Eureka Tower and at Victoria Harbour's Dock 5.

A Eureka Tower spokeswoman said the development had buyers from 144 suburbs, including less affluent suburbs such as Keilor, Altona, Bundoora, Reservoir, Glenroy, Werribee, Deer Park, Ardeer and Sunshine. It was a similar story at Dock 5. Its Melbourne investors were spread across 96 of the city's suburbs.

People from regional areas have also been caught in the rush. Freshwater Place resident Janeta Grant and her husband, Jim, spent three years looking for a city apartment before deciding to buy on the 21st floor. After living there three weeks, Ms Grant is convinced they made the right decision.

They sold their cattle property near Swan Hill and moved to town while they waited for their $1.25 million, three-bedroom apartment to be built. Mr Grant, who also owns KFC franchises, said he chose high-rise living because he wanted something different. "We've done the sea change in reverse. There's nothing much happening (in the country) if you don't play golf or go fishing," he said. "I have always worked seven days a week and don't have those interests. And now I can walk to the footy or the cricket, or anywhere I want to go. "My wife loves going shopping, and just looking out the window you can see things you couldn't see in Swan Hill."

Eureka Tower spokeswoman Lisa Chapman said 91 per cent of buyers were lured by the building's location. "It's two minutes from the freeway and 18 minutes to the airport; they can shut the door and go away for three months," she said.

All towers reported about 80 per cent of purchasers were couples. There were just 10 families in the Eureka Tower and a few in Freshwater Place.