ALAND is a significant player in the Australian construction industry, which is known for its competitiveness and volatility, as developers constantly balance profit margins and project deadlines. Over the years, we have seen some of the biggest names in the industry, such as Jean Nassif’s Toplace, face financial troubles, resulting in stalled developments and uncompleted projects.
In such scenarios, when a rival developer goes into voluntary administration, it presents an opportunity for other players in the industry to step in and take over dormant construction sites. One such example is ALAND taking over an idle Castle Hill apartment site that was previously owned by Toplace.
Why Construction Firms Enter Voluntary Administration
Before delving into the reasons why a company might take over a rival’s project, it is important to understand why construction firms enter voluntary administration. Several Aussie construction developers in Australia have faced financial instability, often due to a combination of factors including rising construction costs, falling property prices, and mismanagement of funds.
Jean Nassif’s Toplace, for instance, was once a dominant name in the Sydney construction scene. However, allegations of structural issues, declining property values, and financial mismanagement led to the company facing severe financial pressure. This, in turn, resulted in several Toplace projects, such as the Skyview Apartments in Castle Hill, being left incomplete. When such situations occur, voluntary administration becomes a mechanism for the company to either restructure its debt or sell off its assets, including its construction sites, to pay off creditors.
Opportunities for Construction Firms in Stalled Projects
When a competitor like Toplace shuts down a project due to financial troubles, other construction companies, such as ALAND, may see an opportunity to step in.
Pre-Approved Development Plans
Acquiring a stalled construction site often means that much of the groundwork has already been done. Planning permissions, environmental approvals, and council endorsements are often already in place. This allows the new developer to save both time and money, as they don’t have to go through the lengthy approval process again.
Established Infrastructure
Many times, construction companies that shut down leave behind a site with partial infrastructure in place, such as foundation work, utilities, and site clearance. Taking over such a site reduces the initial construction costs and accelerates the project timeline.
Undervalued Assets
When a rival developer goes into voluntary administration, their assets, including construction sites, are often sold at a discounted price. This allows the purchasing company to acquire prime real estate at a lower-than-market rate, enhancing the profitability of the project when it is finally completed and sold to consumers.
Reduced Competition
By acquiring a stalled project, a construction company can reduce competition in a highly competitive market. This not only gives them an edge in terms of expanding their portfolio but also strengthens their position in key locations like Sydney, where the property market is particularly competitive.
ALAND Revives Stalled Skyview Towers Project
One of the most prominent recent examples of this strategy is ALAND’s acquisition of the idle Skyview apartment site in Castle Hill, formerly owned by Toplace. This high-profile project – comprising five towers – had been left dormant after Toplace entered voluntary administration in December 2022 with hundreds of millions of dollars owed and KordaMentha overseeing matters. At present, there are still three towers waiting to be finished at Skyview.
Castle Hill is a key suburb in Sydney’s Hills District, which has been undergoing significant residential development in recent years. The area’s proximity to transport links and commercial hubs makes it a desirable location for apartment projects. The Skyview’s location is already a highly-coveted one – it’s just a short walk away from the Castle Towers Shopping Centre.
With many buyers already committed to purchasing units in the stalled Toplace project, there was both a demand and a need to complete the development. ALAND’s acquisition allowed the project to resume, potentially preventing legal complications from disgruntled buyers and contractors. The company’s game plan is to complete the three remaining towers and fix all remediation issues across the complex. Those towers will be repurposed as rental places, with 532 apartments housing up to 1,500 tenants and their families, adding to the 432 units in the other two towers. It will only be possible to actually buy the units after ten years.
However, the road to ALAND’s intervention had not been easy.
Nassif fled Australia to Lebanon after Toplace collapsed. It had already been reeling from a two-year fraud investigation, the evacuations of Mascot and Opal Towers, and a company tasked to handle their remediation, JKN Hills (where Nassif is sole director), was also wound up. Toplace’s closure also affected remediation efforts at another Castle Hills project and a site in Canterbury, and the company was also blacklisted from participating in any construction projects.
Earlier this year, Mr Nassif – whose Fair Trading licence was suspended for ten years – said he wanted to come back to Australia and fix all pending issues with all his projects if there was a guarantee he wouldn’t be arrested. His daughter Ashlyn is already facing fraud charges based on claims she submitted misleading documents that were needed for presale conditions of a $150m Westpac loan to finance the Skyview towers’ completion.
Risks to Consider When Taking Over a Stalled Development Project
While taking over a rival developer’s stalled project can offer substantial benefits, it is not without its risks. Construction companies must carefully assess the viability of the project and the reasons why the previous developer went under. The following are some key risks to consider.
Unresolved Structural or Legal Issues
One of the primary reasons Toplace faced scrutiny was due to alleged structural issues in some of their developments. If a project has unresolved issues, the new developer could inherit these problems, leading to costly legal disputes and further delays. Skyview already failed a Fire and Rescue NSW safety inspection in June 2023, prompting the Hills Shire Council to issue Toplace a rectification order.
With ALAND now in charge of Skyview, it is collaborating with Building Commission NSW and KordaMentha to fix the three towers remediation issues over the next two years.
Reputation Risk
Associating with a troubled project could potentially harm the reputation of the acquiring company. If buyers are already wary of a development due to its history, it may be harder to restore trust and confidence in the market.
David Chandler said there is a chance to turn things around at Skyview, given ALAND’s 20-year record of completing all its projects on time and a well-earned iCIRT Gold rating from Building Commission NSW. He was the NSW Building Commissioner when Skyview was denied an Occupation Certificate in 2021, and later helped in the negotiations that saw ALAND bag the project.
Increased Financial Burden
Completing a project that has been left dormant often requires significant financial investment, especially if the site has been poorly maintained or if there are outstanding debts to contractors and suppliers. A company must have the financial resources to absorb these costs while still turning a profit.
Market Conditions
The property market can fluctuate, and a project that was once financially viable may no longer be as attractive due to shifts in demand, interest rates, or construction costs. Developers need to assess whether market conditions still support the profitability of the project.
Toplace’s administration situation may also be beneficial to other developers who want a slice of that pie – like Kassis Homes, which bought a Toplace site at Garthowen Crescent. Company owner Sam Kassis said that location will be part of a four-year master plan called the Grand Reve.
Conclusion
In the competitive and fast-paced construction industry in Australia, the closure of a rival developer presents both an opportunity and a challenge. For companies like ALAND, acquiring dormant sites such as Skyview can be a lucrative strategy to expand their portfolio and boost their market presence. By stepping in where others have faltered, they can capitalise on pre-approved developments, discounted assets, and existing buyer interest.
However, taking over stalled construction projects is not without its risks, and developers must conduct thorough due diligence to ensure that they are not inheriting more problems than they can handle. With careful planning and financial stability, stepping in to rescue a dormant site can lead to substantial rewards, strengthening a developer’s position in the competitive Australian construction industry.
ALAND’s takeover of Skyview shows how a company can turn adversity into opportunity, driving growth while contributing to the completion of much-needed residential developments in the Sydney market.
DISCLAIMER: This article is for informational purposes only and does not replace official business advice. AVANTE PARTNERS is not affiliated with any construction company and is not an investor in any property developments.
