Developer's Woes Worsen
Sydney Morning Herald
Monday June 2, 2008
CITY PACIFIC'S plans to raise $30 million from the sale of one of its developments appear to have fallen through, fuelling concerns the troubled Brisbane financial and property group is increasingly desperate for cash.
More than two months after City Pacific announced it had entered into a "conditional contract" to sell its Townsville Terminal development to the North Queensland property group CEC, the deal appears to have stalled. In March both companies said one of the conditions of the deal was that due diligence be completed no later than today. This detail appeared to be lost on CEC's chief executive, Roy Lavis, yesterday. He said he thought due diligence was due to be completed on June 16. But Mr Lavis, whose company has been struggling to repay its own debts, conceded CEC was yet to secure any financing or a partner to help fund its proposed purchase of the planned 700-apartment Townsville waterfront development. "We've been working with other people. That's all I can say at this stage," Mr Lavis said. Under the deal, City Pacific was to receive a $12.5 million payment this financial year, with a further $17.5 million staggered over the next two years. It hoped to use the funds as working capital. The delay in the sale of the property, along with City Pacific's failure to sell other developments, comes at a bad time for the company. At the weekend City Pacific's First Mortgage Fund was due to repay $240 million to the Commonwealth Bank. City Pacific's managing director, Phil Sullivan, declined to comment on the status of the loan yesterday. He said an announcement would be made to the stock exchange this morning. Although City Pacific announced in March that it had struck an agreement with the Commonwealth Bank to vary the repayment of the loan to match inflows back into the fund, it has failed to provide any details. The City Pacific-managed fund, which has frozen redemptions to its unit holders, has also failed to provide any updates on about $326 million in outstanding loans to developers that were due to be repaid by March 31. With $707 million in debts due to be repaid by December 31, the fund also had $186 million in loans made out to City Pacific-related projects. These include the troubled $650 million Martha's Cove marina development. The company angered unit holders in the fund in February when it revealed in its half-year accounts that it had deconsolidated the fund. This means City Pacific no no longer has any exposure if the fund collapses. But the listed City Pacific has its own debt problems. It has failed to update the market on an $18.5 million loan that expired last month. City Pacific has a further $100 million debt facility with the Commonwealth Bank that expires in October. According to the group's half-year accounts, it only held $2.6 million of cash on December 31.
© 2008 Sydney Morning Herald
