This article is from the Australian Property Journal archive
LISTED developer Land & Homes Group (LHM) has entered into voluntary administration as it continued to struggle under the weight of a Fortitude Valley apartment project, becoming the latest casualty of the difficult construction environment.
This move comes after the company tried to stave off creditors by selling its investment property at 203-207 Wharf Street in Spring Hill Brisbane four years ago for $19.5 million, to repay its lender UOB Bank. But the sale was a loss result for the company which acquired site for $21 million in 2016.
LHM Group holds the 44-100 Barry Parade site in the popular inner Brisbane locale after acquiring the site for $20 million in 2016. It had developed plans to build 491 apartments on the site but due to COVID construction was put on hold and following the pandemic, the group “contemplated the ongoing feasibility of the project with development costs being the major focus of these considerations”.
“Costs associated with the project have escalated since the completion of the initial feasibility study and there is no confidence that construction costs will materially reduce in the short term. For the project to progress, the Group requires significant capital which is not readily available.”
Construction costs are expected to remain “stubbornly” elevated until at least 2027, according to WT’s latest Australian Construction Market Conditions Report. Soaring costs, issues with capacity, and labour shortages have made life difficult for builders across the country, with countless projects either delayed or shelved altogether.
Brisbane is facing a potentially severe undersupply of apartments in the coming years as a result. Charter Keck Cramer data shows that there is a requirement to build between 6,000 to 8,000 apartments each year to house Brisbane’s forecast 1.6% per annum population growth to FY28, and current trends suggest that only around 3,000 will be built annually over the next few years.
LHM said it had engaged with several investors over the past 12 months to pursue equity funding, but “in the current market, has been unable to attract the required equity support”. The group had also sought expressions of interest for the project and the associated freehold land, but “following evaluation of the non-binding indicative offers received following a marketing campaign, it was determined that none of the offers were viable for the group”.
“In the absence of support for equity funding and the non-renewal of the finance facility with United Overseas Bank Ltd, the directors believe that LHM is unable to continue as a going concern and have no option but to place the LHM Group into voluntary administration,” it said in a statement yesterday.
A first statutory meeting of LHM creditors must be held within eight business days of the appointment of the administrator.
