Developer could make $300,000 windfall on undeveloped North Melbourne site in nine months

The developer, which originally bought it as a permit-approved residential development site, would have gained an average of $33,000 a month until November, if the untenanted building sells for the anticipated price.

The undeveloped nature of the site in an area facing land shortage has pushed up its value, agents say. Photo: Supplied

Colliers International selling agent Dave Walker said the owner’s timing of the market allowed them to make a potential windfall without undergoing any development.

“The vendor has identified a window of opportunity to crystallise development margin profits without turning soil,” he said.

The two-storey building occupies 510 square metres of land sandwiched between four 12-storey apartment towers. One of them is the Unilodge on Villiers student housing block.

The site, with two street frontages, comes with an approved permit for a 12-storey block of 48 apartments.

But its mixed-use zoning means it can also be developed into other uses including hotel, student accommodation, commercial or serviced apartments, subject to planning approval.

“Strong interest from alternative users including student accommodation, hotel providers and serviced apartments who will pay a premium for the location have motivated the vendor to now put the property on the market,” Mr Walker said.

He added that traditional residential developers could find it “difficult” to compete with these alternative property developers which have long-term holding strategies.

Interest in the area was being driven by its location close to the University of Melbourne, RMIT and other research facilities, Mr Walker said.

Down the road on the former Turf Club Hotel site at 1 Flemington Road, a 576-bed student accommodation development is nearing completion, with doors expected to open in February 2019.

It is being developed by student accommodation provider Atira, which is backed by a joint venture between Blue Sky Funds and Goldman Sachs.

Co-agent David Sia said one of the main factors behind the capital growth was the land shortage in that pocket of the city.

“With no more than a handful of freestanding properties remaining in the precinct, the vendor is hoping to capitalise on a space-starved market,” Mr Sia said.

Only two other freestanding commercial buildings on Flemington Road, apart from 87-89, have traded in the past two years, Domain Group records show.

Number 61-63 sold for $3.72 million in August 2017, with the owners recently lodging a permit application for a 12-storey skinny hotel with 55 rooms on the 232-square-metre site.

And the 1870s building at 37 Flemington Road on about 400 square metres sold for $3.71 million in February 2017.