I would welcome views from more economically savy members as to how it may be possible for the Annandale development to be profitable for PBD. No matter how I do my sums, I cannot see reward for investment. The announcement stated that the 23 town houses would sell for about $30M, or approx. $1.32M each. If the profits were shared equally,then you would expect that, so too, would the costs. The costs as I see it are likely to include: Purchase of the land.(If this was already owned by the joint-venture partner, its value would represent part of that joint venture company's contribution and either have to be 50% reimbursed, or that company would receive a commensurate share of the profits). Site preparation. Developmental approvals (this includes management time,salary costs etc.). Construction costs. Marketing costs. Administration,legal costs etc. Loan interest costs.
I have not been able to find out the purchase price of the land, but I suspect its value could be between $6- $10 M. Even at the lower end I cannot see the overall costs coming in less than $15 M ,even if everything went smoothly. The time frame of 2 yrs may also be optimistic. The site is currently rented by Gosford Quarries. Their lease expires at the end of August. The site is a long thin one wedged between a high sandstone cliff along one length. and a raised railway line along the other length A major road runs alongside the railway line, between it and very untidy industrial maritime work yards. If the town houses are to capture any view they would probably have to be 3 levels,and could well interfere with the established views of houses along Bayview Cres. Hence I suspect that there could be objections and a possible prolonged appeal process. All this could add to costs. Because of the location (perhaps a little too close to transport!) and the fact that some of the town houses may not capture a ideal view, they may not sell like hot cakes at $1.3 M. Even if they did, I find it hard to juggle the sums to see that PBD will get a return of more than $8.9 M which has been their contribution to date. ($1.5M from interest bearing working capital reserves and $7.4M in shares allocated to the venture partner). If I was a shareholder I would also want to know, that with today's announcement of two new personnel appointments to the management team, whether salary costs are to increase or whether we can expect some future resignations. (Stephen Court and/or Peter Coppin ?) Can anyone draw a more optimistic picture ? Where am I being too cautious?
PBD Price at posting:
0.9¢ Sentiment: None Disclosure: Not Held
