Project Overview
Client
Real Estate Investment Trusts (REITS) - Listed
Property Type
Mixed Use (Retail, Commercial and Residential Redevelopment)
Reason for Service
Feasibility studies - Acquisitions & disposals - Investment & Development Discounted Cash Flow Analysis
Preston Rowe Paterson was engaged by Mirvac to provide specialist valuation and advisory services to assess alternative acquisition structures for the residential component of a major CBD mixed-use redevelopment.
The assignment focused on:
- Determining the value of residential stratum development rights
- Assessing optimal acquisition timing and structuring
- Supporting negotiations with the counterparty
- Advising on stamp duty and taxation implications across transaction scenarios
Summary of Scope of Services
The instruction required:
- Development feasibility valuation
- Residual land value analysis
- Acquisition structuring advice
- Stratified development interest valuation
- Discounted cash flow (DCF) modelling and sensitivity analysis
- Tax and GST structuring considerations
Asset Overview:
The subject property comprises a prime CBD site located at 505 George Street, Sydney NSW, with a site area of approximately 4,308 sqm and existing cinema improvements.
The proposed development involves a large-scale mixed-use redevelopment incorporating an approximately 11,000 sqm retail podium, 450 residential apartments, a 200-key premium hotel, childcare centres, community facilities, and seven basement levels of car parking.
The scheme is structured with retail uses at the lower levels, a residential tower above, and a hotel component occupying the upper levels. It also includes community infrastructure delivered under a Voluntary Planning Agreement (VPA).
Key Considerations
Mirvac was evaluating two fundamentally different acquisition structures for the residential component:
Option 1 – Early Acquisition (Tenant-in-Common Interest)
- Acquisition of a proportionate interest in the land at an early stage
- Occurring prior to development consent and construction
- Lower acquisition price but higher development risk exposure
Option 2 – Deferred Acquisition (Registered Stratum Lot)
- Acquisition of the completed residential stratum at a future date
- Occurring post-registration of the stratum plan
- Higher acquisition cost reflecting project de-risking
The core challenge was to quantify the value transition over the development lifecycle and determine the optimal balance between:
- Pricing
- Risk
- Timing
- Taxation outcomes
This engagement demonstrates Preston Rowe Paterson’s capability in delivering sophisticated valuation and advisory services for complex, institutional-grade developments:
- Demonstrated expertise in advanced DCF feasibility modelling and residual land valuation;
- Proven experience in multi party development structures and stratum ownership arrangements;
- Deep understanding of the interplay between valuation, taxation, and transaction structuring;
- Ability to provide robust, defensible, and IC ready advice supporting high value negotiations;
- Strong track record in CBD mixed-use developments and staged development valuations; and
- Delivery of data driven insights enabling risk adjusted investment decision-making.
The assignment required a highly structured, analytical approach to ensure valuation outputs were robust, defensible, and actionable at an institutional level.
Outcome
Preston Rowe Paterson’s delivered a comprehensive valuation and structuring framework that enabled Mirvac to:
- Quantify the value of the residential development rights
- Understand value movement across the development lifecycle
- Compare acquisition strategies on a risk-adjusted basis
- Support commercial negotiations with quantified valuation evidence
- Align acquisition strategy with financial and taxation outcomes
Whole of Project Feasibility Model
- Detailed DCF-based residual land valuation of the entire scheme
- Assessment as if developed under single ownership
Incorporation of:
- Development staging
- Construction timing
- Sell-down assumptions
- Retail fit-out (beyond cold shell)
- Hotel FF&E allowances
Component Segmentation
- Separation of revenue streams and cost allocations across:
-
- Retail podium
- Residential apartments
- Hotel
- Basement and common infrastructure
- Allocation of value outcomes between:
-
- Mirvac
- CPG
Timing Overlay & Risk Profiling
- Modelling value at key project milestones, including:
-
- Pre-DA
- Post-DA
- Construction commencement
- Completion
Measurement of value uplift (de-risking premium) through time
Structuring Analysis
- Overlay of the two acquisition scenarios onto the DCF
- Assessment of:
-
- Relative acquisition pricing
- Internal rate of return impacts
- Profit allocation
Tax & GST Consideration
- Review of GST implications and Margin Scheme impacts
- Consideration of how transaction structure affects:
-
- Development costs
- Effective acquisition price
- Tax leakage
Approximately
4,308m²
Site Area
A total of
450
residential apartments
Approximately
11,000m²
retail podium
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