Megara shrugs off crisis with construction start

Western Australian residential developer Megara has not let the COVID-19 crisis derail its latest project, with construction recently starting on its Matheson on Kearns apartment development in the south of the river Perth suburb of Ardross.

Megara director Jamie Clarke said the construction start came after careful consideration of the impacts of the coronavirus pandemic not only on Perth’s apartments market, but also what ramifications it would have on the building industry.

“It was a pretty big decision to start a project in the midst of all of the uncertainty that we had across the board,” Mr Clarke told Australian Property Investor Magazine.

“There was the market uncertainty, funding uncertainty and also construction risks. 

“We had a couple of weeks to make a call whether we wanted to proceed in line with when we had construction booked in for and we had a look at what the impact would be of not starting a project. 

“We definitely considered not making further commitments due to the risk of that uncertainty.”

Mr Clarke said there were several factors that drove Megara to proceed with the 46-apartment project, not the least of which was a long-standing relationship with its construction partner Thomas Building.

He said the first stages of the project would be piling and concrete works, which minimised the risks and impacts of social distancing requirements with relatively few construction workers on site.

“We thought that was manageable assuming the government wasn’t going to shut down the construction sector,” Mr Clarke said.

“Then we considered supply side issues such as glazing and steel out of China, but China was starting to open up again so we felt that risk was manageable as well.”

The other major consideration, Mr Clarke said, was the individuals who had contributed to the project reaching a pre-sales level of around 60 per cent.

“We wanted to look after our existing buyers and we were still seeing buyers inquiring and transacting in the market, so our assessment was that the whole market hadn’t gone to ground,” he said. 

“And also looking through the crisis to an extent, at that stage we were thinking we would be coming out of the end of it in 18 months’ time, and I think there is going to be less volume of product coming through, so we wanted to make sure we’ve got some product coming out the back end as well.”

Designed by Maine Architects, Matheson on Kearns has appeal for both investors and owner-occupiers seeking exposure to Ardross, which is located around 8 kilometres from the Perth CBD.

Apartments in Ardross have a median value of around $550,000, according to research available on the Australian Property Investor Magazine website, with median rents coming in at $450/week.

“The predominant buyer has been owner-occupiers, but we are just starting to see interest from the investor market,” Mr Clarke said.

“It’s for the same reasons that we are developing there - it’s close to an activity centre, it is a higher-end product, it’s boutique, and it has low strata fees.

“We are also putting in an embedded metering power solution in there so that’s reducing the common power costs, which lowers the strata fees and also tenants get a discount on their power as well.”

Mr Clarke said he believed the Perth property market’s current cycle would place Megara in a good position to sell the remaining stock at Matheson on Kearns, with enquiry expected to rise as construction ramps up on site.

“What we were starting to see at the start of the year in low vacancy rates and solid rental yields for the right product, we think those fundamentals are still there,” he said.

“If you look through this year and coming out the back end of this project in the third quarter of 2021, without COVID-19 a lot of people were looking forward to the back end of 2021 in the property market here. 

“Absolutely, COVID is going to have an impact, but I think the WA market fundamentals are good and our exposure is different to the eastern states and our stage of the cycle is quite different to the eastern states.”