This article is from the Australian Property Journal archive
RISING construction costs and supply chain disruptions have claimed another scalp with multibillion developer Caydon Property Group collapsing, putting more than a billion dollar worth of projects in limbo, including its redevelopment of the famed Nylex site in Melbourne.
Receivers Matthew Hutton and Matthew Caddy of McGrathNicol, and Malcolm Howell of liquidators Jirsch Sutherland have been appointed to take control of the Joe Russo-led company’s assets. They were appointed by non-bank lender OCP Asia, which was the lender that pushed Nicholas Smedley and Simon Pitard’s Steller into receivership three years ago, owed $97.3 million.
It is unclear how much Caydon owes OCP Asia.
“Sadly, over the last few years, Caydon has had to deal with one difficult market situation after another. The latest and really confronting challenge we’ve been facing has been the pricing factors affecting the Australian property and construction industry,” Russo said in a statement.
“Pressure on construction costs resulting in builder insolvencies and supply chain interruptions, and now the interest rate pressures and negative house price sentiment, has placed additional pressure on our operations.”
Russo also blamed “prolonged COVID-19 lockdowns” in Melbourne.
Caydon is in the process of turning the historic Nylex site in Cremorne on the Yarra River – known for its iconic clock and silos – into the $1 billion Malt District development with residential, commercial and hotel components. Construction giant Probuild, which collapsed earlier this year, was contracted to construct the first stage of the project.
Caydon has completed the 14,000 sqm office tower that attracted ASX-listed software firm MYOB to fast growing city fringe pocket. The tower was pre-sold to AXA.
Projects in the northern Melbourne suburbs of Alphington and Preston are fully funded and will be unaffected by the collapse, while Caydon also has an apartment project under construction in Moonee Ponds.
“The receivers are undertaking an urgent financial assessment of the properties and assets under their control. We will be working constructively with all stakeholders, including financiers of individual properties, to secure the best possible outcome for all parties,” Hutton said.
Contractual arrangements with purchasers of Caydon’s properties are not expected to be impacted.
Australia’s construction industry has so far had a tumultuous year, headlined by the collapse of giants Probuild– which left up over $5 billion of projects in doubt – followed by Condev in March, creating a dominos effect in the industry.
In Victoria, Snowdon Developments was recently ordered into liquidation by the Victorian Supreme Court impacting 52 employees, 550 homes and over 250 creditors who are owed nearly $18 million, and Langford Jones Homes went into liquidation owing 250 creditors more than $10 million.
After some building material prices soared by at least 40%, construction costs are expected to moderate in 2023 with residential projects tipped to rise by 8 to 10% and commercial construction by 6 to 8%, according to the latest Napier & Blakeley Construction Costs Datacards
Johnny Woodhouse, state director, Victoria at MaxCap Group discussed in Australian Property Journal’s Talking Property Podcast about rising construction costs and the impact on rise and fall contracts and traditional funding structures.
