Developer chases finance to get tallest apartment tower back on track
Developer Beulah International is reassuring buyers of progress at Australia’s tallest residential project, even as it seeks fresh debt and equity to keep the troubled $2.7 billion Sth Bnk development on track.
Beulah on Tuesday put the Sth Bnk project management company into voluntary administration. On Wednesday it said it had started contacting purchasers and would keep engaging with them as the project progressed.
Its conveyancing lawyer said no customer had asked for a refund of their deposit.
“We haven’t had anyone approach us along those lines,” Maddocks partner Nick Holuigue said in response to questions from The Australian Financial Review.
“We are sitting on a huge volume of sales they have achieved despite conditions in the last couple of years.”
But Beulah – which burst onto Melbourne’s development scene a decade ago after representing Malaysian interests in the development of the city’s Australia 108 high-rise tower – must now convince new investors to put money into a highly ambitious project that market sources said would likely cost $1.5 billion to develop, a 40 per cent increase on initial estimates.
It also must reassure the local construction industry it can keep paying its bills.
Beulah’s decision to place the special purpose vehicle into administration came after architects Cox Architecture and UN Studio – designers of the elaborate, twisting, two-tower structure – filed a wind-up notice against it in the Supreme Court of Victoria.
Corporate records also show a notice for an outstanding invoice for $35,000 to engineering services company Stantec.
Construction was initially due to start in 2020, then delayed to last year. On Wednesday, the 6191-square-metre site at 58 Southbank Boulevard – a former BMW dealership Beulah acquired for $101 million in 2017 – sat undisturbed, with only hoarding to indicate the promised development.
The company is in the process of applying for a demolition permit for the existing structure.
Beulah said in late 2023 it had sold 80 per cent of the 700-plus apartments in the project, but since then it has been quiet about the project, battling – like developers the world over – the double-whammy of higher financing and construction costs.
Developers in Victoria say macroeconomic difficulties have been exacerbated by policies such as foreign buyer surcharges.
The company is understood to have approached large local developers, including Lendlease, about collaborating on the project – and providing much-needed capital – but was not successful.
It has also been tweaking the design to reduce costs by removing some of the six planned basement levels that would have been expensive to create, and putting more car parks in the podium of the building.
Beulah is now stepping up efforts to raise equity capital from Asian institutions keen to buy into the Australian housing story.
JLL will lead a roadshow to several Asian cities next month, with KPMG as adviser, to meet potential investors and partner-developers.
But part of the problem for Beulah, also in conversation with local non-bank lenders to secure debt funding, is how to reduce the risks of a tall and highly complex development not seen before in Australia.
The “green spine” – as it was dubbed – project comprises a 365-metre, 102-storey tower and a second rising 295 metres, or 63 storeys. The taller residential tower would dwarf the nearby 319-metre Australia 108 and the smaller one would house commercial offices, a hotel, restaurants and bars.
The construction process will require bespoke solutions to build complicated structures high up, creating new risks that funders needed to be convinced the company – and its contractors – could contain, one financier said.
“It has higher construction costs, it’s huge and there are technical challenges,” they said. “The availability of money is not an issue. It is proving they can overcome those sorts of issues.”
Opinions varied on Wednesday about the future of the project, unveiled after a global design competition that only invited foreign architects – backed up by local firms – to tender for the project, won by the Netherlands-based UN Studio and Cox.
“I don’t see a way forward,” one person with knowledge of the project said. “If your architects are chasing fees and you cut that arm off, how do you expect those architects to reappear?”
Another person was more positive about its chances.
“I wouldn’t write it off,” they said. “But these projects have a lot of technical challenge. These guys are working hard to overcome it.”
Beulah co-founders Adelene Teh and Jiaheng Chan were not available for comment on Wednesday.
“The project is continuing, purchaser deposits are held in a trust and Beulah remains committed to the development,” a spokeswoman said.
