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An ASX-listed property company that has been planning an apartment development in Brisbane's Fortitude Valley since 2016 has entered voluntary administration after failing to secure funding for the project or a sale.
Land & Homes Group (ASX: LHM) acquired a site on 100 Barry Parade for $20 million in mid-2016 with a development approval for a two-tower project already in place, but it sought changes to make the project taller and postponed the pre-sales marketing timeline every year as it struggled to gather the necessary development funding.
The company - backed primarily by Singaporean interests - hit a snag early on due to a heritage protection application for a small industrial building within the site, which was later dismissed by the Queensland Heritage Register.
It eventually managed to succeed with minor changes to the development plan so it could build 491 apartments on the site, but construction was put on hold due to COVID. The state of its finances was then exacerbated by pandemic-related leasing challenges at its first property at Brisbane's Wharf Street, prompting a sale of the asset in July 2021 for $19.5 million.
This freed up some liquidity for 100 Barry Parade as the group's sole project, having run at a loss every year since acquiring the asset. By the end of June this year Land & Homes had accumulated liabilities of more than $36 million with net assets in the red at negative $1.9 million.
By the end of September it had cash equivalents of $452,000 and all of its $33.77 million worth of financing facilities had been drawn down.
In announcing the appointment of Geoffrey Trent Hancock of Hamilton Murphy Advisory as voluntary administrator, Land & Homes Group today explained that post-COVID it had contemplated ongoing feasibility studies for the project due to rising development costs.
"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," Land & Homes stated.
"Over the past 12 months, the group had engaged with several investors to pursue equity funding, but in the current market, has been unable to attract the required equity support. In addition, the group had sought expressions of interest for the project and the associated freehold land.
"However, 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."
The group noted that in the absence of support for equity funding and the non-renewal of a finance facility with United Overseas Bank - with which the 100 Barry Parade property is pledged as a security against its loans - 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".
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