Paul Blackburne loves building in Perth, but he may finally be tempted to head east

Source: The Australian

Perth property developer Paul Blackburne has had so much success selling $1m to $2m apartments to baby boomer downsizers in his hometown that for the first time he is considering undertaking similar projects on Australia’s eastern seaboard.

Mr Blackburne this weekend will officially launch the second stage of his eponymous property group’s $500m West Village project in Perth’s Karrinyup – and has already pre-sold $100m worth of apartments before a $1m display suite is even open for business.

Unlike in other markets across Australia, demand for his apartments in Perth is almost completely from locals. It is a market that he believes will be strong for well into the future.

“We sell a lot to baby boomers who have built up equity over a long time, and have a house that is now worth $3m or $4m and the kids have left home, and now there’s empty rooms in the house,” Mr Blackburne told The Weekend Australian.

“So they are looking to downsize, they want to stay in the suburbs or areas where they have been living and they’ll buy our apartments for $1m or $2m.

“They’ve likely paid off their house so they can afford to buy them and also have money left over for travel and other things they want to do.”

On Saturday, Mr Blackburne is also officially opening his One Subiaco project on the old Subiaco Markets, where he has built luxury apartments atop a new retail precinct.

Mr Blackburne said he was likely to sell another $100m worth of apartments at Karrinyup by early next year and start construction on the project – which will take about two-and-a-half years to complete – by the middle of 2024.

The Karrinyup project is part of an overhaul of the shopping centre there co-owned by Unisuper, which already includes Blackburne Property Group’s first $100m stage in the precinct.

He said the model of building apartments on or next to shopping centres, which gives the retailers a ready-made customer base on their doorstep, was one that could be rolled out by his group more in the future.

Property Developer Paul Blackburne at home. Picture: Richard Hatherly
Property Developer Paul Blackburne at home. Picture: Richard Hatherly

“It’s fair to say there’s institutional investors out there (which own shopping centres) who have seen what we’ve done at Karrinyup and have expressed interest in us working with them,” Mr Blackburne said.

He is getting ready for his next Perth project at Perth’s City Beach – where Blackburne Property Group bought the company that owns a shopping centre site – and is developing plans for what could be a $500m property project there.

While he has stuck with only developing in Perth, usually with about $2bn in projects under way or planned at one time and usually releasing a project each year, Mr Blackburne said he was tempted to explore opportunities further afield after starting his business 20 years ago.

“I’ve been to Sydney recently and I am now thinking about doing what we do here in Perth over there,” Mr Blackburne said.

“So that is something we could definitely do in a couple of years’ time, particularly if planning changes happen that would make it easier to get projects to market quicker. There’s a lack of supply there and there’s a lot of opportunities to replicate our model.”

By that, Mr Blackburne means targeting projects for baby boomers in eastern suburbs and other affluent areas which are cashed up, are empty nesters and would like to downsize.

But he said recent planning processes in Victoria – and before then, Western Australia – would need to happen.

“There’s been a lot of talk about Victoria, but we moved first here in WA and it has been good,” Mr Blackburne said of changes to some building approval processes which have centralised responsibility for decisions and taken them away from councils.

Mr Blackburne, a member of The List – Australia’s Richest 250, is part of a rare group of developers who are able to fund large-scale projects themselves or by borrowing some funds from banks.

Other big-name developers like Tim Gurner raise money from investors and sovereign wealth funds, and partner on projects. Mr Gurner, for example, raised $2bn from offshore institutional investors this year to develop build-to-rent apartment projects.

Billionaire apartments magnate Harry Triguboff and Mr Blackburne eschew outside funding and leverage their own balance sheets to acquire sites and then get projects under way with bank financing after pre-sales targets are met.

Mr Blackburn began in the property industry by borrowing $600,000 to buy part of the rent roll from his father’s firm, Blackburne and Joyce Real Estate, to start his own business.

He still keeps between 10 to 30 per cent of the projects that he develops to rent out, and said he now has about 1200 apartments on his rent roll – the value of which he can leverage to borrow for new investments.

While there is considerable interest in the property sector about build-to-rent projects, where developers or institutions build apartment projects that are entirely rented out, Blackburne Mr was cautious about joining the push into that facet of the property sector.

“I spent some time in New York earlier this year really looking at the model closely and seeing if it can stack up financially,” he said.

“But I think it will be harder here in Australia without incentives and special development zones that make it more attractive for developers to build.

“There is a housing shortage, but I’m not sure that build to rent is the answer to that at the moment without those incentives.”