Parts of Melbourne apartment developer Caydon have been liquidated

Parts of the multi-billion dollar developer Caydon, who is behind hundreds of apartments in Melbourne, have been liquidated.

Joe Russo, director of the prominent Asian-backed developer, said the company had faced one tough market situation after another in recent years, including prolonged Covid lockdowns.

The latest “confrontational” challenge has been price factors impacting the Australian real estate and construction sector.

“Since Caydon’s inception, we have delivered some fantastic projects, including over 3,000 apartments, hotels and offices, which I am extremely proud of,” Mr Russo said in a statement.

“Unfortunately, Caydon has faced one difficult market situation after another in recent years.”

He pointed to Covid disruptions that have created business uncertainty and severely impacted sales.

“Construction costs pressures, resulting in contractor insolvency and supply chain disruptions, and now interest rate pressures and negative house price sentiment, have put additional pressure on our business,” said Mr Russo.

“It was extremely difficult to make this decision, but to ensure the best possible outcome for all our partners and customers, we had to start with the liquidation of part of our Australian business.”

He said two projects under construction – HOME in Alphington and Due North in Preston – would have no impact.

The Australian financial review reported the collapse as the biggest private developer failure since Ralan and Steller in 2019.

McGrathNicol partners Matthew Hutton and Matthew Cady have been appointed as trustees by OCP Asia, which has security over Caydon’s assets and property.

Malcolm Howell of Jirsch Sutherland has been appointed as liquidator.

“The trustees are conducting an urgent financial assessment of the property and assets under their control,” Mr Hutton said in a statement.

“We will work constructively with all stakeholders, including financiers of individual properties, to ensure the best possible outcome for all parties.

“OCP Asia plans to support the bankruptcy process, including by providing additional funding, to ensure the properties and assets can be developed and maintained while options for development and/or disposal are explored.”

Perth developer scraps $165 million apartment project

Caydon’s partial collapse comes less than a week after a developer in Perth killed a $165 million luxury tower where more than 50 percent of the plan’s apartments had been purchased, blaming skyrocketing construction costs and labor shortages.

The high-rise project, which was set to begin construction in April and includes 98 apartments on 38 floors, would be built in South Perth by developer Sirona Urban and Singapore-listed real estate giant Chip Eng Seng.

The condo tower would have been one of the tallest condominiums in Perth, but buyers are now getting their deposits back instead.

Sirona Urban owner Matthew McNeilly said construction costs had risen 30 percent in the past 10 months, while a shortage of retail businesses also caused problems.

$500 million project killed by Melbourne developer

It was the second major apartment project to collapse in Australia last week.

A Melbourne developer, Central Equity, abandoned plans to build a $500 million condominium on the Gold Coast, blaming the crisis in the construction industry and rising construction costs for rendering the project unprofitable.

The development was set to start this year with 486 apartments in a 56-story tower known as Pacific One, and would be built on a beach block in Surfers Paradise.

Apartments had sold from a starting price of $650,000 each, but “industry insiders” had argued that unit prices would have to rise 20 percent to meet higher labor and construction costs, Central Equity said.

The developer declined to reveal how many apartments had been sold off-the-plan for the project, but said buyers had been notified that construction had been canceled and their deposits had been refunded.

Central Equity has been in business for 35 years and has completed 85 developments, but this will be the first time a project has not been completed by the developer.

The accumulation of failed construction companies

It comes as the construction industry has entered a crisis with a wave of corporate collapses.

Earlier this year, two major Australian construction companies, Gold Coast-based Condev and industry giant Probuild, went bankrupt.

The grim list has continued to grow as a number of other high-profile companies also collapsed, including Inside Out Construction, Dyldam Developments, Home Innovation Builders, ABG Group, New Sensation Homes, Next, Pindan, ABD Group and Pivotal Homes.

Others also joined the list, including Solido Builders, Waterford Homes, Affordable Modular Homes, and Statement Builders.

Then two Victorian construction companies were even more victims of the crisis that wound up in late June, with one homeowner spending $300,000 on a now half-finished house.

Hotondo Homes Horsham, a franchisee of a national construction company, collapsed last week, hitting 11 homeowners with $1.2 million in debt outstanding.

According to a report by liquidator Revive Financial, it is the second Hotondo Homes franchisee to go down this year.

Meanwhile, a Sydney family was never able to build their dream home after their builder Jada Group collapsed in March due to $2.4 million and the cost of building their home rose to $1.9 million, a whopping $800,000 more than the original offer.

Snowdon Developments was ordered by the Supreme Court into liquidation with 52 employees, 550 homes and more than 250 creditors in debt just under $18 million, though it was partially surrendered less than 24 hours after it went bankrupt.

Dozens of homeowners and hundreds of craftsmen became confused after a Victorian construction company called Langford Jones Homes went bankrupt on July 4, owing $14.2 million to 300 creditors.

News.com.au also raised questions about NSW builder Willoughby Homes, which is under investigation by the government after construction stalled and debt rose to 90 days.

There are between 10,000 and 12,000 housing companies in Australia undertaking new homes or major renovation projects, a figure estimated by the Association of Professional Builders.

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