Southport Central

Southport Central comprises 788 apartments plus substantial commercial and retail tenancies. With cost blowouts and unpaid subcontractor claims of $20 million the project had been delayed several months. Our Restructuring group took control, and together with our Real Estate group built out the development before selling it down strategically, achieving over $100 million of residential sales.

Background

Southport Central was to comprise 788 residential apartments, over 30,000 sq.m of commercial tenancies and 5,000 sq.m of retail tenancies across three towers in one of Australia’s largest body corporate structures. With a tax related matter increasing the construction budget by 10% and unpaid subcontractor claims of $20 million, progress had slowed and completion had been delayed by several months.

Adding to the issues, a complex legal and organisational structure governed the relationship between the assets, the builder, the developer and the financiers. This included the land being owned by a different entity to which the presale contracts had been signed up in.

How we helped

When we were appointed, we laid out and pursued a three pronged strategy:

1. Take control

We immediately mobilised a team onsite to convey the proposed work out plan as the buy in from employees, subcontractors, the unions and government authorities was critical to restoring construction activity onsite. Negotiations then commenced with construction employees and subcontractors to novate their existing agreements. With large sums of money outstanding for most, negotiations centred around a tiered performance based structure which aligned the interests of our client with the construction team.

2. Build out

Without a builder or building license, we established a building company and negotiated with the governing authority to obtain the required licenses. This certification process can take months but was achieved in a matter of days. We then used our longstanding industry relationships to employ a trusted builder to help complete construction.

A revised construction programme and cost to complete assessment was undertaken which identified a remaining budget of $65.8 million. While construction activity regained momentum, we continued to explore ways to improve progress and make up for lost time. We worked to improve the invoice payment cycles from 30 days to 14 days which had a significant impact on site and resulted in site numbers increasing from 200 per day to 400 per day.

3. Sell down

With the tower complete, there were 96 residential presale contracts valued at $53 million that needed to be settled. However, before settlements could commence, we needed to ensure the entity on the presale contract was the same as the entity that owned the land. An innovative legal solution was created which needed the consent of government agencies as well as requiring 21 individual steps to complete. With settlements of presales underway, there were over 160 apartments and 170 strata commercial units that needed to be sold. Apartments were gradually released to market in a bid to control supply while we offered buyers of the commercial tenancies early access and 12-month settlement terms.

Results

The execution of our strategy resulted in tower 3 being completed four weeks ahead of schedule and $3 million under budget. Over 80% of the presales settled and the commercial campaign delivered 145 sales valued at $38 million in a period of four months. Over the course of our involvement, over 200 residential units were sold with a value of $100 million.