Cards turn on Tinkler the gambler

HE HAS built an unparalleled reputation as the man who could pull off the most unlikely of business deals. And with it came a fortune.
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But yesterday morning Nathan Tinkler was forced to announce his latest venture – to privatise Whitehaven Coal – was dead in the water.

The market took the news badly. Within minutes of the shares coming off a trading hold at 11am, the stock had slumped more than 18 per cent. By the close, the shares were still down 11 per cent.

For Tinkler – the former electrician who in five years turned a $500,000 loan for a coalmine into a position as the wealthiest Australian under 40 – the numbers were stark.

His Whitehaven shares – worth $1.18 billion in April – are now valued at $657 million. That equates to a losing $4 million a day.

But the situation may be worse for the former billionaire than those numbers indicate. One analyst told BusinessDay that potential equity partners were put off investing in the Whitehaven privatisation for fear they could be caught up in a corporate collapse or bankruptcy.

A spokesman for Tinkler described such suggestions as ”rubbish”, but declined to reveal why he withdrew his bid.

The questions many are raising are how much debt Tinkler is carrying and whether his financiers will call in their loans if the value of his Whitehaven holding – constituting the bulk of his wealth – continues to fall?

BusinessDay believes the combined liabilities in Mr Tinkler’s various private entities could be up to $638 million – owed mainly to Singapore-based Noonday Capital Management, an arm of long-term backers Farallon Capital, but also to GE Capital and Westpac. It is not known how far these loans have been drawn down. Mr Tinkler’s spokesman said his maximum liability was ”a mere fraction” of $638 million.

Tinkler has no fear of debt. In 2007, at the age of 30, he mortgaged everything to scrape together the deposit on the Middlemount coal deposit in Queensland, on-selling within 18 months for $442 million. In 2009 he doubled up and won, buying another coal tenement, Maules Creek, for $480 million from Rio Tinto and on-selling it within six months for $1.2 billion in the float of his private

company Aston Resources. In April, he pulled off his third major deal, engineering a three-way merger between Aston, Whitehaven and his private Boardwalk Resources – at a hefty valuation that stunned investors. In yesterday’s deal, Tinkler was the buyer not the seller but could not come up with the cash.

Tinkler – who recently moved to Singapore – has not just borrowed against his Whitehaven shares. He has also taken loans out against his private jet and land in Hawaii. Even machines on his lavish horseracing and breeding properties are leveraged.

And the recent bad news has not been quarantined to his Whitehaven interest. On Monday it emerged that Tinkler’s racing and breeding empire, Patinack Farm, was in financial straits, having failed to pay workers’ superannuation since last November.

Tinkler had tried and failed to sell the whole operation, including more than a thousand horses for $200 million – a $100 million loss on what he pumped in since 2008.

That failure to offload Patinack is costing Tinkler about $500,000 a week to run Australia’s biggest racing operation..

And on Tuesday, a string of businesses came forward to claim that Patinack and other companies linked to Tinkler owed them money.

On Wednesday, one business analyst likened him to entrepreneurs who built a fortune on the back of a boom, only for it all to end in disaster. According to John Singleton, a friend and former investor in Tinkler’s companies, the comparison to Alan Bond and Christopher Skase is bound to hurt.

”If he has one weakness, it’s that he doesn’t like criticism,” says Singleton. ”Not that any of us do, but I’ve certainly had longer to get used to it than Nathan. That’s why he moved to Singapore.”

But Singleton played down Tinkler’s debt situation. ”He’s had a tough run of it. but he’s astute. He’s a gambler … I’m sure he’ll come through this.”

This story Administrator ready to work first appeared on Nanjing Night Net.

Phase one of the boom may be done. Stand by for phase two

AAARRRGGGHHH. It’s the end of the boom!!!! A stunned nation reeled in horror on Wednesday to ”revelations” that BHP Billiton had canned two of its major expansion projects worth more than $50 billion.
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Various newspapers laughably screamed EXCLUSIVE, claiming they’d been predicting the decision for months, conveniently overlooking the fact that BHP chairman Jac Nasser flagged it back in May at a lunch in front of hundreds of Sydney bizoids.

Even the politicians jumped on board. The Honourable Member for Warringah salivated at the announcement. No, he hadn’t read BHP’s statement. But finally he was vindicated. The carbon tax, he said, had killed Olympic Dam, conveniently overlooking that a carbon tax would make uranium more competitive as a power source. Oh yes. And BHP boss Marius Kloppers explicitly ruled out such an argument. Still, who cares? It makes for terrific headlines.

If you want to identify the real sages in this episode you need look no further than BHP investors. They correctly picked the trend more than a year ago, long before even those running our biggest listed company.

BHP shares, and those of its major rival, Rio Tinto, have been on the slide since April last year. And as each eruption in the eurozone’s meltdown gathered intensity, the bulk commodities suppliers took ever greater hits to their market value as investors dumped the shares.

By October, senior BHP executives were flummoxed. The company, even then, was priced for global recession. But it was selling every scrap of red dirt it could dig out of the Pilbara and load onto a China-bound ship. Commodity prices were at near record highs and capacity was strained to breaking point. It didn’t make sense.

But it made perfect sense for investors. For years, they had been complaining that BHP and Rio Tinto had their sights focused too far into the future. The mega-billion-dollar takeovers and the huge expansion plans would deliver returns to future generations. ”But what about us?” they screamed. We want it now.

That investor revolt, which has been bubbling beneath the surface for more than two years, finally has filtered through to the board and management of our resource giants and is the primary force driving this week’s decision. That and the sudden drop in mineral prices.

Postponing the Olympic Dam expansion and the Port Hedland port facilities will be forever etched in history as a turning point. In a sense, it is. But is it the end of the resources boom? Not on your life. It merely is the end of the first phase of the boom, the investment phase that has caused so much pain to the non-mining sector of the economy as the rampaging Australian dollar has battered manufacturing and service industries.

The second phase is destined to last for decades. That extra mining capacity will result in vastly greater volumes of mineral and energy exports. And even though prices are well down on last year’s peak, historically they are still in the stratosphere.

For months, analysts and economists have been fretting that iron ore prices have dropped below $US120 a tonne. That is likely to cause problems for the higher-cost and more marginal operators, some of whom will be forced to shut down.

But cast your minds back a decade. That very same tonne of red dirt would have fetched just $US12. That’s right, one-10th of the price. And remember that BHP and Rio Tinto were making handsome returns back then on those same West Australian mines they’ve been busy expanding in recent years.

That agitation from shareholders to stop the expansions ultimately will put a floor under commodity prices by reducing estimates of future supplies of key raw materials.

And in the next few months, expect more of these kinds of announcements. Marginal coalmine developments and expansions also will be put on ice. For the global economy is in the midst of a slowdown, a contraction that is likely to last quite a few years as the debt crisis in Europe and America is slowly unwound.

What began as a problem in outlying states such as Greece has moved to the centre of the eurozone. Spain and Italy have been under attack by bond markets. And more worryingly, Germany – the engine room of the European economy – seems to be descending dangerously towards recession.

China has felt the chill winds of the European slowdown. This week there were further warnings that the Chinese slowdown is worsening. The once voracious appetite for Chinese exports has abated. And with Chinese authorities apparently reluctant to embark on a huge stimulus program, the short-term outlook for the miracle economy is less than robust.

America, meanwhile, is breathlessly awaiting a new round of stimulus spending, another round of money printing that ultimately will create greater debt and depress the value of the US dollar.

Farcical it might seem, but Wall Street traders secretly sweat that each new set of numbers on the US economy paints a picture of a nation and an economy in trouble.

Why? A stalling economy improves the chances that the US central bank will flood the economy with stimulus money. And given most of that stimulus is delivered through US bond markets, guess who makes a killing?

The short- to medium-term outlook for the global economy is anything but rosy. But there are some heartening developments. That Europe so far has muddled through – despite the incompetence of its lawmakers, bureaucrats and bankers – is enough to give hope.

A radical restructure of the European Union is inevitable. But whatever form that should take – nations such as Greece departing and other nations pulling closer together – the shock value from such changes has greatly diminished. So, too, have the chances of a huge meltdown of global finance.

Greece already has defaulted once. It was an orderly affair. But its debt position remains unsustainable regardless of what policy action is instituted. A further default or perhaps a eurozone exit could be accommodated.

Until recently, the response from eurozone leaders to contain the crisis has been characterised as ”too little, too late”. But the mood is shifting.

For the most part, Australia has been sheltered from the icy winds blowing through the global economy. Now that China is feeling the chill, we, too, will be affected.

But the Asian region remains an area with enormous growth potential. And Australia is well situated to benefit in the medium to longer term. There is no doubt that things are likely to get worse before they get better. But the fruits of the resources boom have yet to flow fully through the economy.

Don’t let anyone tell you otherwise.

This story Administrator ready to work first appeared on Nanjing Night Net.

Mining fears of Chinese invasion

TONY Abbott was at his pugilistic best as he worked through a tight schedule of meetings on his visit to Beijing last month.
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Shaking hands with Chinese dignitaries with the iron-grip confidence of a man who believes he should be the next prime minister, his eyes bulged and veins popped with the adrenalin of meeting senior officials who will set the course of arguably Australia’s most important trade and diplomatic relationship.

His Chinese counterparts were well briefed on our opinion polls; a more senior than usual line-up of party officials and ministers were summoned to have an audience with the opposition leader. When it came to his keynote speech at the Grand Hyatt in Beijing, Abbott had already raised eyebrows by noting that for all of China’s recent economic strides, its people ”still can’t choose their government”.

But then he moved to the crux of his speech – the emotive issue of sovereign investment. While he welcomed foreign investment in principle, he said, Chinese investment ”is complicated by the prevalence of state-owned enterprises”.

”It would rarely be in Australia’s national interest to allow a foreign government or its agencies to control an Australian business,” Abbott said. ”That’s because we don’t support the nationalisation of business by the Australian government, let alone by a foreign one.”

On his return, Abbott launched a policy discussion paper espousing tighter scrutiny on foreign investment in Australian farmland and agribusinesses – including a national register of foreign-owned land and lower trigger levels requiring Foreign Investment Review Board approval. The review board’s chairman, Brian Wilson, has also weighed in, saying Australian businesses, however they are owned, should be run on a purely commercial basis and ”not as an extension of the policy, political or economic agenda of a foreign government”.

Foreign Minister Bob Carr called Tony Abbott’s remarks in Beijing ”dangerously dumb”, and the official Chinese news agency Xinhua characterised Australia’s foreign investment debate as our ”economic xenophobia” on display.

To say no to Chinese SOEs is to say no, effectively, to China. Of the 116 deals involving China in the past six years, 92 of them were made by 45 state-owned enterprises.

Based on transaction value, 95 per cent of Chinese investment into Australia in the same period came through SOEs, according to a recent joint study by consulting firm KPMG and the University of Sydney.

Chinese SOEs have invested nearly $50 billion in Australia in the past five years, with almost all of it in the sensitive sectors of mining and energy. The acceleration has been marked – total Chinese investment in 2007 was just $1.5 billion. And with our traditional sources of foreign investment, the US and Europe, struggling to pull themselves out of their economic funk, signs are China will continue to provide a larger share of our capital needs.

The investment is also highly concentrated. Just 11 SOEs account for 80 per cent of all Chinese investment stock in Australia.

But what are Chinese SOEs and what is behind their push into Australia? Are SOEs driven purely by commercial interests, or are they merely an extension of the Chinese Communist Party? Should they be viewed as an emerging threat to our security, industry and even sovereignty?

”There’s a fear of SOEs and when I say fear, I mean a fear of their real motive and their modus operandi,” says Jason Chang, the chief executive of EMR Capital, a China-focused private equity investment manager. ”It’s very logical, because when you think about SOEs they’re controlled by one shareholder and that’s the Communist Party.

”It’s different ideology, different language, different culture, so when you think about that, it’s not that easy for a Western nation to understand it quickly.”

The rhetoric of the debate has invariably been black or white. There has been political point-scoring from those keen to feed off fears of ”selling the farm” and negative perceptions surrounding China-backed investment. And yet the defence has largely come from business leaders whose corporate profits depend on, or at least are boosted by, healthy levels of investment from China.

One frequent cheerleader for Chinese investment is ANZ chief executive Mike Smith, who is pursuing an aggressive Asian expansion strategy for his bank, and the internationalisation of the Chinese currency, the yuan.

”What is a state-owned institution? The obvious target here is China,” he says. ”I think you have to look at China and say, of its state-owned institutions, what are truly controlled for the interests of the state or, actually, what are run as businesses that happen to be owned by the state.”

Regardless of the size of the transaction, any investment from a state-owned enterprise automatically triggers a Foreign Investment Review Board review. Where a proposal involves a foreign government or a related entity, the review board must consider whether the investment is commercial in nature or if the investor could be pursuing broader political or strategic objectives that may be contrary to Australia’s national interest.

So with the FIRB rules already providing a safeguard against foreign investment which may be against our national interest, why has there been so much debate?

”There’s this underlying assumption when you read the public commentary that there is a conflict of interest between the national interest and that of the SOE,” Chang says. ”I put to you that they can be highly complementary because we have resources and intellectual property which is what China needs to sustain their growth. And they have … financial capital to assist us in developing what we need.

”Australia was built on foreign capital; now foreign capital is just coming from a different time zone than in the past … [but] the concept is exactly the same.”

Tim Murray, an investment analyst who has been based in Beijing for the past 18 years, said conservative politicians were engaging in cheap political point-scoring.

”At the core of it is actually a racist debate and I think the Liberal Party under John Howard and now Tony Abbott, they’re still following the same sort of course,” he says.

”It’s nothing to do with whether they’re state-owned or not, I think it’s a furphy.”

FOR David Lamont, revealing his occupation often proves a show-stopper at barbecues and other social gatherings.

”I work for a company that’s listed in Hong Kong and 72 per cent-owned by a SOE in China, and people go: ‘Why are you doing that?’

The chief financial officer at Minmetals Resources, which is controlled by China Minmetals Corporation, says the common perception was that he was at the beck and call of his Chinese minders. ”That [is] so far from the truth,” Lamont, a former BHP Billiton and PaperlinX executive, says. ”It’s not as though on day one when Minmetals acquired OZ Minerals there was a [Boeing] 747 that arrived from Beijing and unloaded a whole bunch of people who took over the office.”

He says his experience of China Minmetals’ management style was ”no different to any Western company I’ve worked for”. ”Are they tough in certain instances? Yes. Are they sensible and rational? Yes.”

Minmetals Resources launched a takeover for OZ Minerals in 2009, but was blocked by the Australian government due to concerns over the proximity of the Prominent Hill mine to a military site. But a deal excluding Prominent Hill was approved, and Minmetals retained the management of OZ Minerals, including Lamont and chief executive Andrew Michelmore.

Despite a common perception that Chinese investors are put off by an unwieldy FIRB process, or suspect it as an excuse to single out Chinese investment for exclusion, Lamont says China Minmetals ”is no way perturbed” about needing to go through FIRB for every transaction.

”They don’t sit there and take it as an affront,” he says, pointing to subsequent acquisitions in Havilah Resources and Anvil Mining, and a failed play at Equinox, as evidence that China Minmetals were not rendered gun-shy by perceived regulatory hurdles.

Lamont is keen to emphasise that the Australian operations are run autonomously and that the Chinese parent company has not interfered with where the resources its mines produced would go. But ultimately approval for large projects and acquisitions, as with any state-owned enterprise, needs to be cleared with China’s all-powerful National Development and Reform Commission. ”It’s quite clear that the strategy at its broadest is that China growing the way it is … clearly needs to be able to get exposure into the underlying base metals that we produce,” Lamont says.

SOEs are the leading force in China’s offshore investment push. State-owned enterprises are an important instrument of government policy. The government uses SOEs to facilitate structural change in the Chinese economy, to acquire technology from foreign firms, and to secure raw material sources from beyond China’s borders. As of 2010, SOEs held 2.66 trillion yuan ($402.5 billion) in assets outside mainland China, a 50 per cent increase on the previous year.

China’s total outbound direct investment flow reached $US68.8 billion, or 5.2 per cent, of the world’s total in the same year. Seventy per cent of this outbound investment was made by SOEs, according to official statistics.

But despite promising that the government would not influence the commercial decisions of SOEs when it joined the World Trade Organisation in 2001, China does not appear to be keeping this commitment, according to a report prepared last October for the American government’s US-China Economic and Security Review Commission, which found SOEs were likely to retain a critical role in China’s economic make-up. ”If anything, China is doubling down and giving SOEs a more prominent role in achieving the state’s most important economic goals,” the report, by Capital Trade Inc, says.

The report finds the question as to whether state-owned enterprises are acting on their own or merely as a proxy for the Chinese government is moot: most state-owned enterprises, by definition, are either wholly or majority-owned by the state and therefore their actions must be a de facto proxy for their shareholder’s interest.

The influence the Communist Party and the State-owned Assets Supervision Commission exert over the executives of state-owned enterprises mean they face two possibly conflicting sets of incentives. ”You don’t always understand why they’re doing [things], sometimes its not 100 per cent a financial part of the project, but it could be that the government wants him to do it, so he’ll be rewarded for doing it,” Chang says. ”So there’s this strategic element that is not purely financial. But do we have something to fear? I don’t think so, we just need to understand why they’re doing certain things.”

On the one hand, the entities they control are supposed to be profitable, and they are rewarded accordingly based on financial performance. On the other hand, it is also in their best interests to follow the Chinese government’s central policy guidelines, given their career paths are determined by the party’s Central Organisation Department.

”The tricky thing with understanding state-owned enterprise is the role of the top person, who is a Communist Party appointee,” says Geoff Raby, the former Australian ambassador to China.

One of the biggest controversies in Raby’s time at the helm was when Chinalco was trying to increase its stake in Rio Tinto in early 2009. The Australian government’s decision to block the move and the subsequent Chinese backlash is widely considered the low point in recent Australia-China relations.

”I was saying to Canberra: ‘Sure, this is what a state-owned enterprise is, the party secretary runs the show’,” says Raby, who now runs a private consulting firm and is a non-executive director at Fortescue Metals. ”I know party secretary, chairman Xiao Yaqing, very well, he talks to me and he’s very focused on the business dimensions of Rio.

”So there was a very strong and convincing story and I think I convinced Canberra that this was a class-A firm that behaved and operated like a private sector firm – which I believe it still does.”

In the middle of negotiations, the Communist Party’s Central Organisation Department – a powerful and secretive government organ which decides who does what within the party machine – asked chairman Xiao to resign from Chinalco and appointed him deputy secretary-general of the party’s State Council: its equivalent of the government’s parliamentary cabinet.

”People in Canberra were like: ‘What? He goes from running the world’s second-biggest aluminium corporation to being the deputy secretary-general of the State Council?”’ Raby recalls. ”It’s a case of the left hand and the right hand not knowing what it was doing.

”But it certainly set me back in my attempts to persuade people that this was basically a commercial enterprise.”

Raby says the reform of China’s SOE sector is ”the single most important economic challenge” that China’s new leadership faces because of the inefficiencies the state-owned model brings to its economy.

Former Treasury secretary Ken Henry, now the Prime Minister’s special adviser charged with leading the preparation of the Asian Century white paper, says Australians had a similarly adverse reaction when the Japanese ramped up their investment in Australia in the 1980s. But, he says, it goes back even earlier than that.

”Very few people in Australia seem to know that the Foreign Investment Review Board was set up because of concerns in the community about American investment in Australia,” Henry says.

”That was really the first wave of foreign investment to challenge Australian policymakers … and the history is that we will find a way of bringing ourselves to a position of comfort with a significant level of Chinese investment in Australia.”

Much of the negative sentiment around SOE investment stems from its close ties with the ruling Communist Party government and its authoritarian rule, and its chequered record with human rights, social equity and sovereign disputes in the South China Sea.

But Chang says China’s track record with foreign investment has proven it did not want to assert its authority.

”If government’s involved, [people think] they must have a different motive behind it, but bear in mind what they’re trying to do is preserve China’s growth and prosperity, they’re not there to figure out how to conquer Australia,” Chang says.

But the Capital Trade report says the system in place means that despite the autonomy afforded to SOE executives in most circumstances, it must consider the strategic objectives of the Chinese government. Put differently, it says, as long as SOE executives are beholden to the Communist Party, they will have an incentive to choose state goals over financial goals when the two conflict.

But with much of the developed world in the economic doldrums, signs that Chinese economic growth is slowing, and evidence firming that our historic mining boom is running out of puff, perhaps beggars can’t be choosers.

”In the past, whatever we dug up and put on a boat somebody would pay a higher price for that, and if we dug more they’d still buy it. It’s going backwards now,” Murray says, adding that the power dynamics in the region are shifting. ”Prices are going to fall back and when that situation happens, people will be glad to have any investment they can get and that’s when things will naturally change.

”Maybe then, certain enterprises aren’t so bad any more.”

This story Administrator ready to work first appeared on Nanjing Night Net.

Airports stake for Future Fund

THE Future Fund has swooped on a listed fund manager with plans to take off with a direct stake in several Australian airports. The government-owned investment fund surprised the market yesterday with news it was in talks for all the assets in Australian Infrastructure Fund. The fund, which trades as AIX, owns a minority stake in Perth Airport, Melbourne Airport, three regional Queensland airports, Northern Territory Airports, Hochtief Airport Capital and the M4 motorway in Sydney. Hochtief has a stake in airports in Sydney, Athens, Dusseldorf and Hamburg.
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AIX units jumped to a five-year high of $3.26 before settling to close up 17.4 per cent at $3.11.

The Future Fund has signed a memorandum of understanding to buy all the assets for $2 billion, a premium on the $1.8 billion valuation that AIX puts on its own assets.

AIX chairman Paul Espie said the board had agreed to proceed with the offer.

”Ultimately, AIX would finish up as a cash box and the intention is to distribute that cash to our unit holders on the most efficient basis – tax and other issues considered – and thereafter collapse and wind up the corporate structure of AIX. This will take some months,” he said.

Mr Espie said that AIX might still consider a higher offer, but under the memorandum of understanding it would have to pay certain costs and possibly a break fee.

Unit holders will have pre-emptive rights to increase their stake, leaving the possibility that the Future Fund will get less than 100 per cent.

The Future Fund already owns 16.8 per cent of Australian Pacific Airports Corporation, which runs Melbourne and Launceston airports. The AIX takeover will increase its stake to 43 per cent.

This story Administrator ready to work first appeared on Nanjing Night Net.

A lifeblood lesson for Australian industry

The right medicine: Brian McNamee’s vision drove CSL’s vision worldwide.AT 33, Brian McNamee was chosen to run the Commonwealth Serum Laboratories: a small government enterprise manufacturing plasma, antibiotics, flu vaccines and other medicaments for Australia and its neighbours.
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This week CSL announced its first $US1 billion global profit for 2011-12. It is now Australia’s most successful manufacturing business, and by a long way.

While CSL, too, is being belted by the high dollar – the annual earnings report a ”foreign currency headwind of $A108 million” – its global structure, with manufacturing plants in four countries, its high productivity and premium products have allowed it to withstand those headwinds, and remain highly profitable. (Its $US1 billion profit was achieved on just $US4.6 billion of sales.)

It has been an amazing journey that few would have expected when, in late 1989, then industry minister John Button headhunted the young McNamee to become director of CSL, with the ultimate aim of privatising it to be a flagship for the fledgling Australian pharmaceutical industry.

It is an unusual story, of a most unusual company, in which the cultures of the scientific researcher and the corporate carnivore have merged to create an enterprise that in some ways defies modern fashions, and in other ways anticipated them.

It is now very much a global company, on the verge of becoming one of the world’s top 20 pharmaceutical companies, and with 90 per cent of its revenues coming from outside Australia. Yet it is based in an unpretentious old building on the wrong side of Royal Park, where CSL has been since 1918. Its head office has only about 20 staff.

Its big markets are the US and Europe, with a fast-growing Asian trade. But it is led by an Australian-dominated board, chaired by molecular biologist Professor John Shine, carries out half of its vast research and development activity in Melbourne – with 400 to 500 researchers – and credits Australian research for much of its global revenue.

It is not just McNamee who has been with the company for decades. Most of his senior executive team have been there for decades, in CSL itself, or in the companies it has acquired. McNamee’s main interest is in strategy, and he is happy to delegate and trust his deputies. He habitually uses ”we”, not ”I”, to explain his thinking. For a top 20 company, it sounds remarkably collegial.

”People think we’re scientists bubbling away with test tubes,” he says with self-deprecation. ”But we think we’re also pretty good at business. We’ve been financially conservative, but operationally very bold and aggressive.”

McNamee’s goal, he says, was to create ”a great Australian company”. He’s done that, and after 23 years at the helm, plans to hand over in July 2013 to Paul Perrault, now head of CSL Behring, its Philadelphia-based plasma subsidiary. A doctor by training, McNamee drifted into pharmaceuticals in his 20s while in Germany after a brief try at emulating his brother Paul on the professional tennis circuit. At 27, he was recruited back to Australia by Fauldings, helped Button draft the Factor f pharmaceuticals industry plan, then ran Pacific Biotech before being conscripted to CSL.

From the outset, McNamee set his sights on building a global business, created by specialising, building scale, innovating, exporting – and making strategic takeovers. They began at a small scale before CSL was floated on the stock exchange in 1994, valued at $300 million. It is now valued at about $20 billion.

”Most of Australia’s assets are stressed: small assets, low scale,” he says. ”It’s either get bigger, or get out. You either consolidate, or get consolidated. We elected to be the consolidator.”

CSL developed its expertise in mergers and acquisitions through smaller takeovers before astounding critics in 2000 by taking over a firm roughly its own size, its Swiss counterpart ZLB Bioplasma, at a time when McNamee was fighting testicular cancer. Four years later it followed that up by acquiring a second big target, US-based Aventis Behring. A third ambitious bid, for US rival Talecris, was blocked by US regulators in 2009.

McNamee says CSL succeeded because it was patient, disciplined and had worked out how the merged companies would fit together.

”Most acquisitions fail, in my view, because people overpay. We were very disciplined about what we bid, and we had a very clear idea of how we would add value to it … You only buy a business when they’re suffering; if they’re not suffering, you overpay.

”You have to decide why you are the natural owner of that business. We never wanted to be a big company. We wanted to be a fine company … very good at what it did.”

CSL is now organised into a global supply chain, collecting and processing plasma and manufacturing a range of products. Its plants in Broadmeadows and Parkville supply Australia, Asia and the Pacific. Its factory at Kankakee, near Chicago, produces plasma intermediaries for all CSL plants and supplies North America. Its plants in the Swiss capital Berne and in Marburg in Germany, supply Europe and the rest of the world.

Mergers were only part of McNamee’s game plan. At the outset, he moved to lift productivity sharply by slashing CSL’s staff. He made exports a prime goal. He cut out low-margin products, and – with some exceptions for Australia – narrowed CSL’s product range to those where it could be globally competitive. And he was lucky that the Hawke government was already building a global-scale plasma plant at Broadmeadows.

With Australian local manufacturing under so much pressure from the high dollar, those remain his core strategies. ”You have to set your focus on world markets,” he says. ”We need to focus on being good at a smaller number of activities. We have to be in the premium products end.

”Switzerland and Germany have worked out how to deal with the problems of an overvalued currency, and that’s primarily the problem we face. If the high dollar is here to stay, we need innovative industries and clusters. We’re very fortunate to be in the Parkville area – the (research) networks it created have been very important for us.”

One other thing McNamee firmly believes Australia must learn from Germany and Switzerland is the importance of wage restraint, to remain globally competitive. CSL has just been through an unusually bruising wage negotiation in which its unions used strike action to win wage rises of 3.75 to 4 per cent over each of the next three years.

This was very different from the way its enterprise-based unions in CSL’s Swiss and German plants operate. Germany entered the euro with an overvalued deutschmark, but won back its lost competitiveness with 15 years of wage restraint. Swiss workers have wage restraint ingrained in them. The OECD reports that since 1995, average wages have risen 22 per cent in Germany, 33 per cent in Switzerland – but 107 per cent in Australia.

So far, CSL has been able to cope with a dollar above parity, but McNamee warns that is no longer inevitable: ”If you combine a high dollar with wages growth that sits ahead of the global competition, it’s inevitable that will put many assets at risk – including CSL’s.”

But this time next year, that will be someone else’s problem. Brian McNamee is not sure what he’ll be doing, but at 55, he’s got a lot of life in him.

This story Administrator ready to work first appeared on Nanjing Night Net.

Founders scoop off the cream

DIRECTORS’ trades picked up this week against a background of the earnings reporting season getting into full swing.
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The scorecard registered $18 million to $32 million in favour of sellers.

The selling tally was boosted by various folk who founded or have been associated with the building of successful businesses.

Penelope Maclagan joined Computershare three decades ago, five years after it was started by brother Christopher Morris.

The pair have been taking money off the table quite regularly, the latest sale by Maclagan raising $3.8 million.

She retains a useful $120 million of stock.

Elsewhere, Roger Brown’s interests collected nearly $14 million through the sale of ARB Corporation scrip, a few days after the four-wheel-drive vehicle accessories group reported marginal earnings growth.

Executive chairman Brown – who started the business with pipe-bending equipment in his mother’s driveway – has presided over a rare gem of a company whose scrip has appreciated at 18 per cent-plus compound a year for two decades, with similar earnings growth.

Roger Brown, along with brother Andrew – the group’s managing director – retain $79 million worth of paper.

Webjet, also no slouch in the price appreciation stakes, hit a new $4.22 high recently and non-executive director Steven Scheuer reduced his stake by about 7 per cent. He sold shares at $4.13. They closed the week at $3.91.

Meanwhile, if memory serves correctly, ANZ chief Michael Smith did once buy some bank shares on the market in 2008, paying $22.75 a share. The jolly Englishman, though, has got almost all his shares through incentive measures and he has cashed some in to pay tax and, believe it or not, to repay debt.

Interests associated with concrete king Raymond Barro continued buying Adelaide Brighton shares.

The market was unimpressed with the company’s 7 per cent pre-tax earnings increase for the half-year and the shares fell 11 per cent.

Barro stepped into the market and spent more than $15 million.

The reporter owns ABC and ARP shares.

This story Administrator ready to work first appeared on Nanjing Night Net.

Offshore move gives gloom the boot

Blundstone boots are now made in Asia.WHEN Blundstone shut its 137-year-old Hobart bootmaking factory in 2007 and moved production overseas, it was criticised by unions, politicians and the press.
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Australian icons that head offshore are never popular, and this story was a gift to subeditors looking for puns. ”These boots were made for walking: Blundstone strides off to Asia,” The Age reported. ”Blunnies workers get the boot,” said The Australian.

Five years later, chief executive Steve Gunn says there is ”no way” the company could have survived the subsequent surge in the Australian dollar. ”We were struggling, really struggling hard,” Gunn says. ”We could have survived for a while but it would have been a downhill slide.” Now Blundstone is bucking the gloom engulfing many manufacturers.

Gunn says that while the Hobart plant was efficient, it struggled to meet the wave of overseas demand that comes in the northern winter, when people in those markets want boots. This constrained the company from expanding its exports.

Since then, with most production split between India and Thailand, it has nearly doubled exports. Last year was its most profitable year on record. The 300 factory jobs lost in Hobart are unlikely to return, but it still employs about 115 people in Australia in a gumboot factory and in white-collar jobs.

”We really should be looking at the fact that we’ve saved 100-plus jobs, rather than the fact that we’ve lost 300, and I realise that’s very hard for people to appreciate if they happen to be one of the 300,” Gunn says.

As manufacturers grapple with the high dollar, Blundstone’s experience is telling.

In contrast to previous criticism, the move offshore was this week hailed by former Treasury secretary Ken Henry as an example of an Australian company playing to the country’s strengths.

For companies to thrive during the Asia boom, which has brought the high dollar, Henry argued they needed to make the most of the ”competitive advantages” – such as our educated workforce and advanced technology.

”Instead of making the same products that we were making 140 years ago, that capacity can instead be used to make and do things that only we can do, or that Australia can do better than people in other countries,” he said.

Henry stressed that this was more than simply taking output from existing factories in Asia. It’s also about companies trying to integrate themselves more deeply in the region.

ResMed, medical product manufacturer, has also invested in factories in Singapore and Malaysia, in addition to its research and development work in Australia.

A UBS healthcare analyst, Andrew Goodsall, says this has given them lower costs and provided a handy shield against the high Australian dollar. Similarly to Blundstone, it also benefits from being far closer to markets in the northern hemisphere, with shorter shipment times. ”Because Singapore is so much closer to their market they save a week’s worth of working capital,” Goodsall says.

Vitamin company Blackmores has also pursued Asian operations for the past two decades, with profits doubling in the past three years.

Henry says its success was built on combining ”the Asian appetite for preventive medicine with Australia’s reputation for quality, safety, and strong regulation”.

Far from just defending offshoring as a cost-cutting strategy, Henry says these examples show how Australian companies can exploit the Asian century to their advantage.

But that’s not to say investing overseas is a silver bullet that can resolve the problems facing many manufacturers. Pacific Brands, the owner of Bonds, sparked a furore when it cut 1800 jobs and moved manufacturing to China in 2009, but the strategy has failed to revive the company’s fortunes. CEO Sue Morphet, the architect of the plan, was this week replaced by former Foster’s boss John Pollaers.

The company’s woes highlight that offshoring is far from a sure fix for struggling companies in the manufacturing industry – because they need many other core strengths, such as Blundstone’s iconic brand or Blackmores’ reputation.

The chief Australian economist at Bank of America Merrill Lynch, Saul Eslake, also stresses that while survival strategies built on Asian integration can help individual companies survive, they won’t stop the shrinking of manufacturing in this country.

Ultimately, Eslake says there’s no escaping the harsh arithmetic of the boom. For mining to radically expand its share of the economy, the relative share of other industries has to shrink. If the currency is indeed ”stronger for longer”, Eslake says this may mean more jobs in Australia are lost.

This story Administrator ready to work first appeared on Nanjing Night Net.

Market’s five-week run hits the wall

THE sharemarket closed lower yesterday, ending a run of five weeks of gains amid fears the mining boom might have ended and as hopes for quick monetary stimulus in the US faded.
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The benchmark S&P/ASX 200 Index fell 34.7 points, or 0.8 per cent, to 4349, for a loss of 0.2 per cent over the week.

Among the big sectors, materials lost 1.4 per cent, consumer staples 1.4 per cent, energy 1 per cent and financials 0.6 per cent. The telcos index was the only sub-index to gain, rising 0.4 per cent on the day.

Questions over whether the decade-long bull run in commodities has ended have become louder in recent weeks as data shows China heading for the slowest annual growth in more than a decade, driving down copper, iron ore and other raw materials.

Reserve Bank chief Glenn Stevens said it was too soon to call an end to the mining boom, intensifying debate over the outlook for the resource-rich economy as miners, including BHP, shelve expansion plans and takeover deals.

”Miners are being weighed down by the fact that iron ore prices are dropping,” said Damien Boey, equity strategist at Credit Suisse.

Iron ore prices dropped 5 per cent on Thursday to $US 99.60, below the $US100 mark for the first time since 2009.

Mr Boey said the banking sector was also hit amid concern about the robustness of the Australian economy, given fallen commodity prices and expenditure cutting by mining companies.

”This isn’t a good thing for employment and if it’s not a good thing for employment, it’s not a good thing for potentially bad debts,” Mr Boey said.

”So people are a little bit concerned now that both these sectors are kind of taking related risks from China’s slowdown.”

Yesterday ended the busiest week of the earnings season with Woolworths announcing a net profit of $1.82 billion, down 14.5 per cent. Its shares fell 48¢, 1.7 per cent to $29.

Fairfax shares took another bath, dropping 11 per cent to a record low of 45.5¢ after Gina Rinehart tried unsuccessfully to sell a third of her 15 per cent stake in the media company at 50¢ a share.

Its stock slumped 10 per cent on Thursday when it reported a $2.73 billion full-year net loss.

Coalminer Whitehaven posted improved net profit of $62.5 million for the year but its shares dropped 11.2 per cent to $3.09 after magnate Nathan Tinkler shelved a $5.2 billion takeover bid.

Elsewhere, resource stocks dragged the market lower.

BHP Billiton dropped 32¢ to $33.09 and Rio Tinto lost $2.38, or 4.4 per cent, to $51.80. Fortescue Metals suffered heavy losses following a downgrade by broker Nomura, losing 26¢, or more than 6 per cent, to $3.98.

The big banks were down but not by as much, with Commonwealth Bank falling 24¢ to $54.90, ANZ 23¢ off at $24.77, Westpac losing 12¢ to $24.65 and National Australia Bank falling 17¢ to $25.14.


This story Administrator ready to work first appeared on Nanjing Night Net.

Is the mining boom over?

Is it time to look beyond mineral resources for Australia’s future prosperity?AUSTRALIA’S mining boom was never going to last forever. Tucked away in the budget papers two years ago were estimates from Treasury and Geoscience Australia about how long our minerals would last. Iron ore was set to run out in 70 years at the current rate of extraction, gold in just 30 years. Black coal would last longer – 90 years, meaning many very young Australians will still be alive when the last lumps of black coal are dug from the soil and thrust into furnaces.
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Treasury was careful to say its estimates weren’t definitive. Higher prices could ”encourage greater investment in exploration activities and new discoveries”. But its message was clear: mining would be unable to power Australia’s economy forever. Sooner or later – within one lifetime or maybe two – we would have to face up to the question of what comes next.

It’s the sort of question Australia has faced in the past. Those who grew up in the 1950s were forever being told the nation rode on the sheep’s back. Back then the farm sector accounted for a quarter of Australia’s production. Today it accounts for a little over 2 per cent.

For the most part that transition away from agriculture has been managed smoothly (although for a while woolgrowers tried to stare change in the face by legislating a floor price for wool, with disastrous consequences). The subsequent decline of manufacturing has been more painful, mainly because of the number of people employed. In the 1960s manufacturing provided jobs to one in every four Australian workers. Today it employs just one in 12.

On Thursday, Resources Minister Martin Ferguson seemed to ring in the next change. Speaking to the ABC’s AM program after BHP shelved plans to build what would have been the world’s biggest uranium mine at Olympic Dam in South Australia’s arid north, he declared the boom over.

”It’s about time Tony Abbott stopped talking down Australia both at home and internationally and recognised how well placed we are,” he said.

”But you’ve got to understand, the resources boom is over. We’ve done well – $270 billion in investment, the envy of the world. It has got tougher in the last six to 12 months. Look at Europe, the state of the European and global economies.

”Think about the difficulties in China, with still strong growth. The next round was always going to be difficult and I must say Olympic Dam was always a very, very challenging project – its sheer size.”

Prime Minister Julia Gillard rushed to reassure the public that Ferguson had not meant to say what it sounded as if he had.

”He has indicated that prices have come off a bit – or, if you like, that the commodity price boom has passed its peak,” she told Parliament. ”But there is a huge investment phase which still has some way to run and the export boom in resources still has a very long way to run.”

The simultaneous industrialisation of the world’s two most populated nations – China and India – has decades to run. Another 1.1 billion Asians are expected to move to cities over the next 30 years and they will require housing and supporting infrastructure. The Reserve Bank has estimated a typical Chinese apartment requires about six tonnes of steel, while 10 kilometres of metropolitan subway requires about 75,000 tonnes. Each tonne of steel produced requires about 1.7 tonnes of iron ore and more than half a tonne of coking coal.

But the plummeting mining profits and shelved resource projects have underscored the need for Australia to prepare for a time when it must rely on a different mix of exports, mostly knowledge-based services.

Resources exports have forged deep economic ties between Australia and Asia. But the mining boom may just be the prelude to the main game of Asia’s economic emergence. By the middle of this century, more than half of the world’s economic activity will occur in Asia.

This landmark shift creates economic possibilities unimagined even a decade ago. As the region’s middle class becomes richer, demand for a long and different menu of Australian exports including foodstuffs, tourism, education, financial services, business services, professional services and niche manufacturing will grow steeply. Australia’s proximity to the Asian economic powerhouse means it is well placed to capitalise.

But the shift from selling Asian customers bulk commodities such as coal, iron ore and gas to the far more nuanced task of exporting a wide range of goods and services into diverse Asian markets won’t be easy.

”It is one thing to sell a homogeneous minerals commodity to a minerals-hungry industrialist in China, and another thing entirely to design and market a sophisticated personal service to someone living in that culture,” said former Treasury secretary Ken Henry in a speech to business this week.

Australians have become much more aware of Asia, especially through holiday travel in the region. But experts warn that our knowledge is superficial. Even though many more of us are travelling to Indonesia and other south-east Asian destinations, fewer students are studying Indonesian now than in the 1970s. A recent business survey found that less than half of Australian businesses with dealings in Asia have any senior executives or board members with Asian experience or language ability.

Asia’s middle classes are emerging as the world’s biggest consumer group, but many of them won’t speak English. They will also have business cultures and political systems different from ours.

Henry, who is writing the government’s forthcoming white paper on preparing Australia for the Asian century, says the nation needs to build its ”Asia-relevant capabilities”. It will be crucial that Australian students gain a much deeper understanding of the cultures and languages of Asia.

Businesses will also need to think differently. Many companies that are defined as Australian will have to start looking at themselves as regional and be willing to move components of their business to Asia in order to survive.

THE Prime Minister and the Resources Minister are both right. The resources boom has ended, but only in a limited sense, for now.

It was kicked off last decade by an explosion of urbanisation in China. The first effect was to push up prices. With Australia and suppliers in Brazil and India ill prepared, the only way China could get the iron ore it needed to cater for its rapidly expanding cities was to bid up the price from a long-term average of about $US13 a tonne in 2002 to an extraordinary $US180 a tonne by last year. For Australian miners the undreamt of price was pure profit – they hadn’t needed to spend an extra cent to get it, which is why Kevin Rudd and Wayne Swan wanted to tax some of it away as super profits.

The price boom begat the investment boom as resources companies scrambled to mine more of the stuff. The investment boom is boosting the economy in its own right, drawing in billions in overseas capital and employing more workers constructing mines than will eventually be employed operating them.

But as miners around the world have raised production, prices have eased. A year ago iron ore was fetching about $US180 a tonne but yesterday the price slipped below $US100 for the first time since the global financial crisis.

Investment will turn down soon. Reserve Bank governor Glenn Stevens told Parliament’s economics committee yesterday he expected investment spending to peak ”within the next year or two” although it would remain at an unusually high level for a long time.

Big investments in gas production mean exports are set to quintuple by the end of this decade.

But Peter Coleman, chief executive of Woodside Petroleum, Australia’s biggest gas producer, says that as commodity prices fall miners are becoming more cautious about investments.

”We’re just seeing a natural part of the cycle, to be honest. It’s kind of like that long wave that comes into the beach, it’s starting to break. That’s what commodity cycles do, and then we’ll pick up another one here soon. It just depends on picking the right one.”

But even if the resource price boom is over, and the resource investment boom is coming to an end, our resource income boom still has some way to run. This pay-off from the investment boom – the extra resources Australia is able to ship out of the country – will stay with us for decades.

After China will come India. China has just passed a truly historic milestone: half of its population now live in cities. India’s rate of urbanisation is just a third, so it has a long way to go. In the past 15 years India has shot up from being the world’s 10th-biggest steel producer to its fourth. While India is blessed with vast reserves of high-quality iron ore, it is desperately short of the coking coal used to turn it into steel. Australia will be in the box seat once more, given our stocks of high-quality coal.

Even so, Deloitte Access director Chris Richardson says there could be a ”tricky phase” for the Australian economy as commodity prices fall and we wait for recent investment in mining capacity to come on line.

”In late 2014 going into 2015 we are going to have to change gears from construction as an economic driver to export earnings,” he said. ”There could be a pothole. We don’t know how big it will be.”

Some parts of the economy will benefit as the effects of the mining boom fade a little. The Australian dollar will probably fall, providing a boost to important sectors – such as tourism, education and parts of manufacturing and retail – that have been badly affected by the high exchange rate.

The companies in those sectors that have weathered the effects of the soaring exchange rate are likely to thrive if the dollar pulls back.

Meanwhile, Henry says there is no room for complacency. Australia should waste no time adapting and reforming our policy settings to make the most of opportunities beyond the mining boom.

”It would be a mistake to think that geography and/or geology alone will get us where we want to go and allow Australia somehow to ride the wave of the Asian century around us.”

Matt Wade is a senior writer.

Peter Martin is economics correspondent.

This story Administrator ready to work first appeared on Nanjing Night Net.

Doctors in the house on Wellington Parade

End of an era: Mowbray students protesting at Parliament when their school closed.THE Royal Australian College of General Practitioners has paid about $25 million for a prominent East Melbourne office – for years the headquarters of utilities company Melbourne Water.
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The college, Australia’s largest professional general practice organisation representing some 21,000 members, will own and occupy four levels of the six-level building as its national office.

At 100 Wellington Parade, opposite Yarra Park and the Melbourne Cricket Ground, the former Melbourne Water building will now be known as RACGP College House.

The 6500 square-metre office, with 102 car parks, is much larger than the four-level South Melbourne office at 1-7 Palmerston Crescent that the college occupied for 17 years, but sold last week for $9 million.

The college, which represents urban and rural general practitioners, will lease part of the East Melbourne building.

Jones Lang LaSalle director Richard Norman says just one level of the building is available for rent at $285 per square metre, per annum.

Property enthusiasts with longer memories may remember the East Melbourne asset was once controlled by the Heine Brothers empire, which was considered one of Australia’s largest steel exporters.

More recently the building was leased to Melbourne Water, which in 2010 announced a move to more modern new headquarters in Docklands.

Melbourne Water made headlines in June when, because of an administration error, its clients were overcharged more than $300 million. Melbourne Water has quietly been selling development sites across metropolitan Melbourne for years.

Mowbray’s site deficit

ADMINISTRATORS for defunct western suburb private college Mowbray are likely to recover just half of the school’s $18 million debts from the sale of its three campuses.

In a complicated sale campaign in which value will depend on potential land use, particularly if the sites can be rebuilt as residential projects, the three school campuses are thought to be worth a total of about $9 million.

The largest school, the 17.75 hectare Patterson campus in Melton, is expected to sell for about $6 million. Two smaller campuses in Caroline Springs, including the 1.25 hectare residential 1-zoned town centre campus at 183-191 Caroline Springs Boulevard, and the 1.06 hectare Brookside campus at Federation Way, are likely to each reap about $1.5 million.

The Caroline Springs campuses are the most suitable for medium-density residential redevelopment.

Private schools seeking an avenue into the growing western suburbs market might view the Melton campus as a chance to buy at below cost price.

CBRE and Fitzroys are representing administrator Deloitte Australia in marketing the sites.

Stationer on Collins

WESFARMERS-owned stationery chain Officeworks will pay annual rent of about $450,000 to occupy a 650-square-metre shop with a wide 18-metre street-frontage at 461 Bourke Street.

Officeworks has signed a five-year lease to occupy what were two adjoining CBD retail spaces trading until recently as a restaurant/bar and hairdressing salon. At the ground floor of the 43-year old, 19-level office known for years as Dalgety House, Officeworks has agreed to fixed annual rent increases of 3.5 per cent until 2017, when it has an option to renew for another five years.

Kliger Wood agent Russell Meerkin said Officeworks already operated a number of CBD stationery outlets, but this location would place them very centrally in the insurance, legal and business precinct.

AV outsources sales

REVERSING a decision it made five years ago when the land sale market was more buoyant, developer AVJennings has again outsourced its sale and marketing division.

In 2010, the 80-year old company sold its building arm to leading Japan-based home builder Sekisui, and earlier this month it announced a $29.5 million annual loss for the last financial year.

It has appointed local agency RPM Real Estate to market blocks within all of its Victorian estates.

AVJennings controls a diversified Victorian portfolio, which includes a land subdivision at Portarlington, near Geelong.

It also controls large parcels of land in the major growth areas of Epping, in outer-northern Melbourne, and Officer, about 50 kilometres from the CBD in the outer south-east near Clyde North, which is expected to become an important new township under plans announced late last year by the Baillieu government.

Site fit for royalty

FOUR months after buying a dozen properties from the Melbourne-based Viento Property Trust, Sydney-based Denison Funds Management has listed for sale one of that portfolio’s largest and most versatile properties at 14 Queens Road, in an area identified as Melbourne, but with the postcode 3004.

The 1970s brown brick building, known for years until 2009 as Atari House, sits on a large 2327-square-metre site opposite Albert Park Lake, about two kilometres south of the CBD. Rising 13 levels, and with 8158 square metres to let and 120 car parks, the asset is about 75 per cent leased.

In recent years, residential developers including Evolve Development, part-backed by former Fairfax chairman Ron Walker, have targeted Queens Road sites because of the postcard views apartments can offer of the lake and Port Phillip Bay.

MP Burke Commercial director Pat Burke, who is representing Denison with former colleague Leigh Melbourne from Colliers International, says 14 Queens Road also offers CBD views to the north that can never be built out. The asset sale is expected to boost Denison’s coffers by about $15 million, which it will use to reduce the fund’s debt.

Evolve recently demolished the former single-storey luxury Suntory restaurant at 74 Queens Road, renowned throughout the 1980s for its picturesque gardens and its cuisine, and is rebuilding the block as Monarc, a 13-level predominantly glass apartment tower with 228-apartments.

Living on a cloud

LOCAL developer Piccolo is the buyer of the prominent former Electrical Trades Union building in Carlton.

At 516-520 Swanston Street, on the south-east corner of Queensberry Street, the site is now set to make way for Upper House, a 17-level, 110-unit residential complex designed by Jackson Clements Burrows Architects.

The $50 million Upper House complex will be divided into two parts: the Podium (comprising the lower levels) and the Cloud (upper levels). Between them, and appearing to occupy an entire level, will be a common area fitted with a gymnasium, indoor and outdoor lounge and dining areas and an observatory deck. One-bedroom apartments, being marketed by Colliers International, start at $380,000.

Piccolo is believed to have paid about $5 million for the former ETU building, which is across the road from the former Carlton & United Brewery site that another local developer, Grocon, bought from RMIT University for $39 million in 2006. Grocon, which has recently been seeking equity partners for many of its projects, is proposing to rebuild the Carlton site as a mixed-use village.

Piccolo, whose development focus has centred on corner blocks in Carlton, is also responsible for the $50 million low-rise low-density called the Garden House complex at 85 Rathdowne Street opposite Carlton Gardens.

The ETU recently relocated to another owner-occupied office at 200 Arden Street in North Melbourne.

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This story Administrator ready to work first appeared on Nanjing Night Net.