Saraceni disputes Raine receivership

Property developer Luke Saraceni has questioned the appointment of receivers to his company’s $500 million Raine Square project, claiming the appointment was unnecessary given the strong financial position of the project and his business.

KordaMentha was appointed receivers and managers of Westgem’s $500 million Perth CBD project this week, which has been dogged by delays in building since the commencement of the project in 2006.

Shortly after KordaMentha announced it had been appointed, Mr Saraceni and his Westgem co-director, Hossean Pourzand, released a statement objecting to the receivership.

“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 statement said.

The statement claims the decision to appoint KordaMentha was made by security holders Bankwest and Bank of Scotland after Westgem did not make a payment of $50 million on December 31, during which time Westgem was proposing refinancing options to its creditors.

“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,” Saracen Properties said.

“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 Properties’ statement claimed the growing debt was largely thanks to the seven-month delay on the project last year, when the initial builder, Salta, walked off the job in February and was eventually replaced by Probuild in September.

The developer also noted the reluctance of Australian banks to increase their exposure to commercial property assets since the onset of the global financial crisis.

“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,” the developer said.

Mr Saraceni appeared equally confident in Raine Square’s profitability.

“Raine Square has strong financial metrics and is likely to generate a surplus return,” the statement said.

The development, which will house Bankwest at its completion, is 80 per cent finished and is fully funded to completion, while 70 per cent of the retail leasing space has been signed on to already.

The receiver estimated construction work on the project would be completed in July while the tunnel leading to Perth train station will now be completed by 2012.

KordaMentha principal Mark Mentha said: “Given the history of the project, the receivership will provide certainty to the builders, the contractors, financiers, retail tenants and leaseholders.”

The announcement of receivers being appointed to Westgem adds to a growing list of construction companies in receivership this financial year. Two mid-sized construction companies – Sizer Builders and 20*20 – announced they went into voluntary administration in December