03/02/2011 - 00:00

Receiver claims ‘no profit’ in Raine Square

03/02/2011 - 00:00

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THE receiver for the $500 million Raine Square office tower says its financiers were unable to accept any refinancing proposals put forward by the developer because the project was no longer profitable.

Receiver claims ‘no profit’ in Raine Square

THE receiver for the $500 million Raine Square office tower says its financiers were unable to accept any refinancing proposals put forward by the developer because the project was no longer profitable.

But Saracen Properties managing director Luke Saraceni maintains the project will make money, and says the receiver should have been more concerned with ensuring a suitable refinancing proposal was in place.

KordaMentha partner Mark Mentha said multiple conditions and caveats attached to two proposals put forward to recapitalise the project highlighted the fact that Raine Square would not produce a profit.

“Everyone who is looking at recapitalising Mr Saraceni and the project sponsors, they all want to do it at a discount, which reflects the fact that there is no profit in Raine Square,” he said.

“How can it be seen as a profitable project when all the parties that are being brought to the table by the sponsors are trying to do it at a discount?”

Mr Mentha said the cumulative effect of building delays stemming from Saracen Properties’ dispute with its original builder, Salta Constructions, had resulted in a negative impact to the project’s bottom line.

“The fact that this project was at a standstill for seven months has a multiplier impact, both in terms of cost, interest cost, and also at the back end, where Mr Saraceni has also guaranteed the lease on the Bankwest Tower, which Bankwest currently occupy,” he said. “At today’s rates, that’s about $48 million worth of liability that still needs to be mitigated, and the longer that takes the more it costs for the building to be completed.”

Mr Saraceni said Bankwest had not given any logical reasons as to why it rejected numerous proposals to refinance the project, including proposals from international investment banks Goldman Sachs and Mount Kellett Capital.

Either of those proposals would have given Raine Square a loan-to-value ratio of 57 to 59 per cent upon completion, which Mr Saraceni said should have satisfied the bank.

“Its not that Raine Square was unprofitable; the question is, does the bank have a good loan or a bad loan by the proposal that’s been put forward?” Mr Saraceni said.

“Clearly the proposal that was put forward by Mount Kellett was a very good loan structure.”

He said he would mount legal action as soon as possible to prove his assertion that receivers had been invalidly appointed to Raine Square.

“There will be a legal dispute over this, they didn’t need to take this project over,” Mr Saraceni said.

“It doesn’t matter what (Bankwest) says and what KordaMentha says, it’s very difficult for them to justify why they took this project over.”

 

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