An Aussie developer, a US theatre and the lenders chasing millions
Lenders of Caydon Property Group are still owed hundreds of millions of dollars three years after its collapse, with a new lawsuit accusing founder Joe Russo and a former executive of negligence and unauthorised self-dealings.
Caydon, which was led by Russo, was one of Melbourne’s biggest private developers before it collapsed in July 2022. The developer went broke after a big expansion into the United States saddled it with significant debt.
Caydon’s unsecured creditors are still owed over $860 million, according to liquidator documents. About $450 million of that amount is owed to a trust managed by One Investment Group.
Other lenders such as ASX-listed Qualitas, which is owed about $1 million, also remain unpaid, according to the documents. The remainder of outstanding liabilities, amounting to about $400 million, are unpaid intercompany loans and employee wages and super.
Russo and girlfriend Emma Alexander – who was appointed as chief operating officer of Caydon’s US operations – had acquired a slew of development sites in California and Texas. Russo and Alexander met at Caydon, where she had worked for more than decade until the company’s collapse.
‘Dangerous’ theatre
Among those assets was the New California Theatre in downtown San Diego, the property at the centre of the new US lawsuit. The lawsuit, filed by a Caydon subsidiary, alleges Russo and Alexander misrepresented and failed to disclose their “severe mismanagement” of the company.
Caydon San Diego is managed by the company’s Australian-based receiver, McGrathNicol’s Matthew Hutton. Hutton was appointed by lender OCP Asia to oversee a liquidation process for all of Caydon’s assets.
It purchased the abandoned New California Theatre – which was left in an allegedly dilapidated and dangerous state for more than 30 years – in 2019.
Russo and Alexander allegedly failed to disclose that the theatre had been the subject of litigation on multiple occasions, including criminal prosecution actions by the San Diego council against the previous owners. At the time of Caydon’s purchase, the property was embroiled in a lawsuit from a local organisation that sought to block developers from demolishing the asset.
Caydon had envisioned the site’s transformation into a 41-storey tower that included a 190-room hotel and 336 apartments, but tough construction conditions and overwhelming debt forced the developer to scrap those plans.
In the lawsuit filed at the Southern California district court, the couple have also been accused of numerous acts of self-dealing that were not disclosed, all of which were instances where they breached their fiduciary duties to the company.
“Although they owed fiduciary duties to Caydon, Russo and Alexander took actions in their own interest, not Caydon’s,” the legal complaint says.
Caydon is seeking millions of dollars in damages due to Russo and Alexander’s handling of the theatre.
In response to the lawsuit, Alexander said she was no longer working at Caydon. “There is no substance to the claims and I have been advised they will be withdrawn,” Alexander said.
No buyers for mansion
Caydon San Diego is itself being sued by the Californian state and the city of San Diego. Both have accused the company of allowing the theatre to be structurally unsafe and filled with hazardous materials.
The state and local governments are seeking to compel Caydon to demolish the property because of its dangerous condition. They are also seeking more than $US1 million ($1.58 million) in damages for the alleged public nuisance the theatre has caused.
Caydon San Diego has been trying to offload the site since 2022, but it has been unable to find buyers due to the property’s poor condition. In the legal complaint, the company said it was unclear whether the property could even sell.
An extravagant Hollywood Hills mansion developed by Caydon in Los Angeles – it is not part of the lawsuit – was put on the market in June last year to recoup money for lenders. But it also failed to sell.
The multi-storey property hovers above Hollywood’s famous Sunset Boulevard in the exclusive Bird Streets neighbourhood, a short drive from Beverly Hills and Downtown LA.
The residential development is set up for entertaining, spanning 1254 square metres with five bedrooms, eight bathrooms and a huge outdoor deck with panoramic views over the city.
It hit the market with an asking price of $US43 million. That has since dropped to $US35 million.
Hutton and Russo declined to comment.
