The director of beleaguered office development Raine Square has labelled its receivership unnecessary, saying the project still has "strong financial metrics".
The director of beleaguered office development Raine Square has labelled its receiveship unnecessary, saying the project still has "strong financial metrics".
Luke Saraceni made the comment in a statement released after the office tower was placed by its financiers Bankwest and BOS International into the hands of receivers from KordaMentha.
KordaMentha will tell tenants it is "business as usual" at the unfinished tower, which Mr Saraceni says is 80 per cent finished and fully funded to completion.
Receivers moved onto the Raine Square site this morning to oversee the completion of the construction, management and sale of the $500 million project.
Raine Square was being developed by Mr Saraceni's Westgem Investments, an entity jointly owned with business associate Hossean Pourzand.
It is understood Westgem missed a substantial payment to financiers Bankwest last month, which appointed Mark Mentha and Cliffe Rocke of KordaMentha as receivers and managers.
Mr Saraceni has confirmed Westgem missed a payment of $50 million while a "number of commercial proposals put forward by Westgem to Bankwest were being considered".
He also stated Westgem presented a range of refinancing options to Bankwest but that the security holders would not engage with Westgem.
"One of our first priorities will be to call a meeting of tenancies to reassure them that from their perspective it is business as usual," Mr Mentha said in a statement released today.
A Bankwest spokesperson said the bank's planned move of 3,000 employees into the tower in early 2012 would go ahead, with no delays expected as a result of the appointment of receivers.
The $500 million development has been plagued by delays, the most significant lasting for seven months after the original construction company, Salta Construction, stopped work over a contract dispute.
The project began construction in 2006, and was expected to be completed in late 2009.
Mr Mentha said the replacement builder, Probuild, was making good progress on the build, and construction should be complete by July.
Tunnelling works linking Raine Square to the underground train station and one40william should be completed by 2012.
Mr Saraceni's full statement is included below:
Mark Mentha and Cliff Rocke of KordaMentha were today appointed Receivers and Managers to Westgem Investments P/L ("Westgem"), developer of the AUD$500M Raine Square development ("Raine Square") in Perth, Australia.
The Director of Westgem does not believe this appointment of the Receivers and Managers was necessary, given the strong financial metrics of the project; however it is committed to work with KordaMentha and other related stakeholders to ensure the project is delivered within the expectations of all parties.
The Raine Square development is one of Western Australia's leading mixed use office/ retail developments that once completed will house 44,000 square metres of office space over 20 levels and 13,000 square metres of retail space over three levels. It also features a tunnel connection to the new William St train station, a 227-bay public car park and 650 seat food court on the ground level at one of Perth's busiest pedestrian intersections.
Raine Square has strong financial metrics and is likely to generate a surplus return.
The project is 80% complete and is fully funded to completion; as such the day-to-day activities of the builder and associated contractors will not be affected in any way by the appointment of KordaMentha.
Bankwest has entered into an Agreement to Lease all available office space within Raine Square, with Westgem also having obtaining pre-leasing commitments of 70% of the available retail space within the building.
The decision to appoint KordaMentha was made by security holders Bankwest and Bank of Scotland after Westgem did not make a payment of AUD$50M on 31 December 2010, while a number of commercial proposals put forward by Westgem to Bankwest were being considered.
Westgem presented a range of refinancing options in relation to the debt associated with this project, largely based on delays caused by the replacement of its builder in September 2010 and an acknowledgement that the Australian banking sector lenders have been actively trying to reduce their exposure to commercial property assets since the GFC.
Over a number of months, Westgem had tried to engage with the security holders to progress a range of commercial proposals designed at reducing the banks exposure to this project and refinancing the associated debt. The security holders did not at any time engage with Westgem in relation to any of these proposals generated by Westgem, the majority of which Westgem considered would have generated additional returns to the security holders.
Saracen Property Group, which holds a substantial portfolio of assets worth well in excess of any potential liabilities associated with Raine Square, will continue to operate in a 'business-as-usual" fashion.