The Raine Square / Saracen / KordaMentha Stoush

OK, so when I posted this
last story
, the links were open to
the public but have now been locked for subscribers only so I can’t
access them anymore. So basically the story has been going along
like this: On the 11th and 12th Jan, news
reports
broke that the $500 million Raine Square
development was being put into receivership by its financiers
Bankwest and Bank of Scotland International: Mark Mentha
and Cliff Rocke of KordaMentha have immediately moved to manage the
building site, after developers, Westgem Investments Pty Ltd,
missed a $50 million payment on December 31. “Under the facility
agreement with Westgem, there’s been a breach now for some time,”
Mr Mentha said. “The financiers have been in protracted
negotiations [with Westgem], affording every assistance and
opportunity to sell assets or to find a joint venture partner or
white knight but unfortunately they hadn’t been able to do that.”
Mr Mentha added that KordaMentha had been monitoring the project on
behalf of the financiers for the past 18 months. The building site
has been affected by several delays and cost increases, including
an eight-month delay last year when the original construction
company, Salta Constructions, stopped work over in early 2010.
Building company Probuild took over construction in September 2010
and the receivers said it was making good progress, with the
building scheduled to be completed by July this year.
Saracen Properties counterted that the refinancing was
unnecessary and the receivers were putting forward proposals merely
to increase commercial revenue from the project, and not listening
to his proposals for refinancing the works for completion. The
receivers of course rejected these claims, leading to the blame
game. On the 13th Jan, reports
revealed KordaMetha had already received some offers to purchase
the property. KordaMentha is currently focused on
completing the project, which is expected to be by July this year
while the fit out of the building is expected to be wrapped up by
the end of this year. Receiver Mark Mentha has previously said
KordaMentha will complete the building before putting it onto the
market. However it is understood that if the right offer came in,
KordaMentha could sell the building earlier.
So I guess
Westgem wouldn’t be too happy that the option to sell or not, and
when, has been taken out of their hands. On the 21st Jan, Luke
Saraceni came
out swinging
, as KordaMentha seized three of his other
properties. He said the bank wanted to prevent him from
being able to have any input on the remainder of the project. He
was keen to have some input because he was a major creditor to the
development. “All they want to do is take the surplus out (of the
three assets) and apply it to Raine Square,” Mr Saraceni said.
“They don’t need to do this before that building is finished. There
is enough money in that building, when it’s finished, to not sell
any of these (three assets). “What they are attempting is a very
vindictive approach to try to put maximum pressure on me, both
publicly and in my overall business, to try to bring me to heel so
I don’t keep them honest. And that’s what this is about. It’s a
game that’s being played. A very, very vindictive game. If the
Commonwealth Bank, Bankwest and BOSI (Bank of Scotland
International) think they will destroy me, to try to get me out of
the way so they can do whatever they like with a profitable asset,
they’ve got another think coming. I’ve only just started and they
will rue the day that they attempted to do this to me. Watch this
space.”
Later on the 21st, it
was revealed
that$1.33 million was transferred out of a
Westgem account into another Saracen Property Group account, the
day before the receivers were appointed.
[Pitcher Partners managing director Mr Hughes said] “I
have noted that there is certainly a prospect, without having
examined it in any detail at this point, that it is likely to fall
under the insolvency transaction under the Corporations Act, which
basically gives the liquidator a right of recovery against those
funds. I will investigate that and that will be included in the
report to creditors.” Receiver Mark Mentha … described the $1.33
million transaction as a deliberate and unlawful act. “I would say
it’s an unlawful transfer that’s taken place to move money out of
Westgem away from Westgem’s creditors,” Mr Mentha said. “I think
it’s a deliberate act that’s lessened the rights of the recovery
capabilities of the Westgem creditors, which is the banks and the
creditors represented today. I think it’s a very serious issue… the
administrator has indicated he will investigate (and) he believes
on his preliminary view that it is an insolvent transaction and
therefore capable of recovery if he’s appointed liquidator.” The
exact number of creditors is still uncertain as is the amount of
monies owed to creditors.
On the 25th Jan, Luke Saraceni
revealed
he was meeting with foreign investors, trying to resolve his
refinancing options, to present to the receivers. Mr
Saraceni told PerthNow that he has not stopped working on
developing new refinancing proposals amid canvassing the intentions
of interested foreign parties despite the January 11 appointment of
receivers to the $500 million CBD project. “We are continuing to
speak to international investors about taking back the Raine Square
project,” Mr Saraceni said. “We’ve continuously been working on
refinancing proposals for Raine Square and had them all knocked
back. And parties are still continuing to talk to us about trying
to resolve the issues we have with the financiers.” Mr Saraceni
alleges that the receivers were unlawfully appointed.
On
the 27th Jan, the Administrators
issued a writ to the Supreme Court
for the return of the
$1.33 million dollars. “I’m asserting in the writ that
I’m looking for the return of the unauthorised payment of $1.33
million,” Mr Mentha said. “I’m arguing that it was not authorised
in that it was a breach of fiduciary, common law and statutory
duties under the Corporations Act owed to Westgem, where the
payment was neither in good faith nor for valuable consideration.
Further, I also claim that the GST monies, which it relates to,
were a breach of trust created by the terms of the financing
deeds.” Mr Mentha said he was only just informed this afternoon
that Mr Saraceni has allegedly stated he is going to pay the money
back. “I understand that there is negotiations going on between the
lawyers as to paying the money back,” Mr Mentha said. Last Friday
Mr Saraceni told PerthNow that the $1.33 million transfer was to
pay a project management contract fee and it was a case of
unfortunate timing that receivers were appointed the day after the
transaction. But he said the money has not been spent and was
currently in escrow. However Mr Mentha disagreed with this last
point. “It has been stated before that the money is held in escrow,
to our knowledge that is not the case and the monies are just
sitting in a Saracen bank account,” Mr Mentha said. Mr Saraceni
also said he was willing to take the matter to court. “If the
receiver believes it’s his, then let’s go to court,” Mr Saraceni
said late last week.
So…thats the wrap-up for this
week – what a mess!!

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3 thoughts on “The Raine Square / Saracen / KordaMentha Stoush

  1. Pingback: The Raine Square Saga Continues…(again) « Architectural Happenings in Perth

  2. I think dealing with banks in our current economic climate is very difficult and I’d be surprised if we don’t hear more failed negotiations over the coming months from many developers vs the banks.

    Richard Branson has a window of opportunity right now with a Virgin bank – lets hope he steps in and introduces some serious competition.

  3. Pingback: Raine Square Update « Architectural Happenings in Perth

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