Saraceni returns fire on Bankwest

Embattled property tycoon Luke Saraceni has lashed out at Bankwest, saying it had a conflict of interest that "blinded rational decision making" with regards to troubled office development Raine Square.

The dispute over Raine Square escalated to the Supreme Court yesterday, when KordaMentha receiver Mark Mentha filed a writ alleging Mr Saraceni illegally transferred $1.3 million out of Westgem Investments a day before receivers seized control of the project.

According to a Bankwest spokesperson, the funds were supposed to be provided to Raine Square's joint financiers, Bankwest and Bank of Scotland International.

Mr Saraceni told WA Business News the money was sitting in a bank account and he was waiting to go to court to get an interpretation of who it belongs to.

Mr Saraceni also said he offered to return the funds to Westgem.

Pitcher Partners managing director Bryan Hughes said the transaction was just one of many he would investigate in his role as administrator of Westgem, to which he was appointed January 11.

Mr Saraceni said Bankwest had a massive conflict of interest by seizing control of the tower, being both Raine Square's anchor-tenant and project financier.

"The banks want to keep control of this project, because they are the tenant," Mr Saraceni said.

"They will be paying $390 per square metre, when the market rent is approaching $700/sqm.

"They have 45,000sqm of office space, and they have put 10,000 back into the market, at $700/sqm, because they don't need the whole 45,000.

"They are actively marketing that at the moment, so that tells you a little story in itself.

"Their conflict of interest has blinded rational decision making, at our great expense."

A Bankwest spokesperson refuted those claims, saying the terms of the lease, including rent, were agreed to by Westgem and Mr Saraceni as part of the overall negotations to secure Bankwest as the head tenant.

Mr Saraceni maintained Bankwest did not need to take action on Raine Square, and the debt issues would have resolved themselves.

Westgem Investments is estimated to owe the joint financiers $330 million.

Bankwest appointed receivers to the project after Westgem missed a scheduled $50 million debt repayment at the end of December.

"There is sufficient equity left in Raine Square for the bank to have been paid all its money, and every creditor, for which there are hardly any, to be paid out," Mr Saraceni said.

"The bank didn't need to take this action, and there are consequences that will result to the bank for having done so."

Last week Bankwest appointed receivers to three more Saraceni assets which were listed as guarantors to Raine Square, including a vineyard in Margaret River, strata retail units in Spearwood, and a shopping centre in Warrnambool, NSW.

"The last three assets that we put up as securities, that had receivers appointed, we received the press release before the paperwork," Mr Saraceni revealed.

"Their PR machine is working flat-out, attempting to discredit us."

Of particular concern to Mr Saraceni was that Bankwest rejected a proposal from international investment bank Goldman Sachs in January to inject $150 million to normalise the project and ensure it was funded to completion.

The Goldman Sachs proposal would have given Raine Square a loan to value ratio of about 57 to 59 per cent upon completion, which Mr Saraceni said was quite low risk for the bank, and the sort of ratios banks normally seek for very safe assets.

"It just doesn't make sense that they didn't accept the Goldman Sachs restructuring proposal," he said.

"They've given reasons, none of which are sound logical reasons.

"They say it was too uncertain. How can a proposal from one of the biggest banks in the world be uncertain?"

Sources close to the financiers said that any alternative financial arrangement put forth by Mr Saraceni involved makjing a significant number of concessions.

"In effect they were asking the financiers to foot the bill to the tune of many millions," the source said.

Mr Saraceni said although the Saracen group of companies had "taken a blow to its mid-ships" through the dispute, his empire was not crumbling, and he would have sufficient capital for what he expected to be a protracted legal fight.

"(Saracen Properties) is still alive and will continue to operate because we have other assets and projects that aren't connected to Raine Square and we have other sources of cash flow that aren't connected or tied to Raine Square," he said.

"Obviously it's caused an enormous amount of disruption in our organisation and we are having to do considerably more work to make sure that all of our other stuff is running smoothly, but that's what happens when someone takes this sort of unconscionable action against you and then starts hitting you in the press wherever they can.

"We've already told the bank that we believe that they have been invalidly appointed, and we've asked them to take this matter to trial as soon as possible to decide as to whether they have been validly appointed.

"They have a duty to everyone involved to have this heard. So we are putting pressure on them in that regard."