Receivers have been appointed to the $500 million Raine Square office/retail tower project in Perth, which was being jointly developed by rich list member Luke Saraceni and fellow property developer Hossean Pourzard.
Major lender Bankwest – which has also signed on as the 20-storey tower’s major tenant – called in receivers Mark Korda and Cliff Rocke of insolvency firm Korda Mentha in conjunction with fellow lender Bank of Scotland.
Reports suggest that Saraceni and Pourzard’s joint venture company, Westgem Investments, missed a $50 million payment to their lenders in late 2010. Attempts to refinance the project have been unsuccessful.
The Raine Square project has a troubled history. Saraceni and Pourzard purchased the site in 2004 for $21.5 million and began work in 2006.
But while the tower was expected to be completed by the end of 2009, a series of problems have beset the project.
In early 2010, the first construction company engaged on the project, Salta Constructions, abruptly quit the project after a dispute with Westgem. This led to a delay of several months while the two companies fired legal claims at one another.
There are also claims allegations of gang violence associated with the site. The car of a construction company manager was firebombed in one incident.
Despite all this, Korda Mentha said yesterday that the project’s current construction company, Probuild, was progressing well, with building expected to be completed by July.
“Given the history of the project, the receivership will provide certainty to the builders, the contractors, financiers, the retail tenants and leaseholders,” Mark Korda said in a statement.
However, Saraceni has reacted angrily to the appointment, claiming in The West Australian that Bankwest’s parent company, Commonwealth Bank, rejected a number of refinancing deals he had put forward and were determined to “take control of that asset at the cheapest possible price”.
The bank has rejected the accusation.
Saraceni made his debut on the BRW Rich 200 list in 2009 with a fortune of $300 million, but this was reduced to $288 million due to the problems at Raine Square.
His development company, Saracen Properties, has a number of residential and commercial projects underway around Perth and also owns a winery.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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