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Raine Square squabble escalates

AS the shutdown of the Raine Square development site in central Perth enters its third week, speculation continues over the possible fallout from the dispute that prompted the lead building contractor to close the site.
Both the developer Saracen Properties and its lead contractor Salta Constructions confirmed the disagreement was over variations to the builders' contract, which was originally expected to be for $265 million.
Both sides said the amount in dispute remained confidential.
But that hasn't stopped industry speculation about the detail of the dispute and its implications.
The lucrative fit-out contract for BankWest's offices at Raine Square appears to be the latest contentious issue emerging from the dispute. Managing the fit-out is often considered cream on the cake for builders.
Last week, Saracen Properties managing director Luke Saraceni said Commonwealth Bank, which owns BankWest, would be doing its own fit-out of the completed offices at Raine Square.
He has also threatened to complete construction with another builder.
"Salta were just awarded the services component of the fit out, the mechanical and electrical stuff, which is really just part of the base build," Mr Saraceni said.
"The fit out was taken out of their hands.
"I'm sure it had an impact, because it would have affected their profitability."
But Salta Constructions managing director Sam Tarascio said that Salta would be performing fit-out works, and work in relation to the fit-out had nothing to do with the dispute between Salta and Saracen Properties.
"Salta Constructions remains ready, willing and able to resume work pending satisfactory negotiations with our client," Mr Tarascio said in an email to WA Business News.
"Our focus remains on progressing these negotiations."
Throughout the dispute on Raine Square, Salta has continued working on the construction of a $140 million, six-storey office block at 226 Adelaide Terrace for Queensland-based developer First State Group.
A key concern in the sector was that Saracen Properties was under financial pressure from its banks, a situation that has become more common among property developers in the current climate (see feature page 10).
Last week, Saracen put two Subiaco properties worth an estimated $90 million up for sale.
But Mr Saraceni adamantly denied those rumours, saying he had a good relationship with his banks and the Subiaco sales were a normal part of his company's operations.
He also denied he was seeking more capital.
"We're not like a publicly listed company that goes onto the market and discounts everything and says come and buy some more of our shares," he said.
"We have to use our own resources, which means we sell very strategic assets from time to time, to fund our various businesses.
"That's a normal part of what we do, we keep half of our stuff and we sell the other half to keep our cash flows going.
"We're not doing a capital raising; and in this market, how do you raise capital?"
Delays in the project are understood to have forced Saracen to take up leasing obligations for Raine Square's anchor tenant, BankWest, in its existing St Georges Tce building, owned by Stockland Trust and Brookfield Multiplex Property Trust.
Mr Saraceni was unavailable to comment on speculation that the term of that new lease is five years.

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