Case Studies

Kooralbyn Resort, 1 Routley Drive, Kooralbyn QLD /

Category	Size	Type	Comment	Sale price
Mixed use land subdivision	300h (est)	Development	100 room hotel with tavern Two golf courses and equestrian facilities Airstrip and a variety of other buildings International school Englobo land subdivision	$6.5m
Key issues
The complexity of the asset historically limited the potential interest of buyers, along with its relatively remote location. The buyer pool was further limited due to the limited availability of finance for the asset. The asset had extensive holding costs in excess of $100k per month. Eventually the property sold for $6.5m plus GST. The hotel was closed in 2008 and was in need of substantial capital investment. Some facilities including the school are tenanted and generate rental income.
Castlereagh Strategy / Solution
Castlereagh worked with the purchaser to negotiate and amend a vendor finance structure that: Facilitated a sale and settlement; Removed the holding costs; Transferred the risk to the purchaser; Provided additional security; and Generated strong additional returns to the vendor (fees, high interest on loan (15%pa)). This allowed the purchaser to sell down redundant parcels of the development and repay the vendor.

507-523 Dalrymple Road, Mt Louisa, Townsville QLD /

Category	Size	Type	Comment	Sale price
Mixed use site	8h (est)	Development	Three adjoining 8 hectare vacant lots rising from Dalrymple Road to the summit of Mt Louisa	c$1.73m
Key issues
Located c10km from the Townsville CBD. The severity of the mountainous terrain severely limited the site’s development potential. A suitable development approval needed to be obtained to develop the lower sections of the site. Road access to the site was restricted via a service road to Dalrymple Road. The majority of the site was unusable given its steep topography. The lower parts of each lot had the potential for residential development.
Castlereagh Strategy / Solution
Castlereagh worked with the purchaser to negotiate and amend a vendor finance structure that: Facilitated a sale and settlement; Removed the holding costs; Transferred the risk to the purchaser; Provided additional security; and Generated strong additional returns to the vendor (fees, high interest on loan (15%pa)). This allowed the purchaser to achieve planning outcome and refinance with a development financier.

Forest Resort, 1500 Midland Highway, Creswick VIC /

Category	Size	Type	Comment	Sale price
Mixed use site/resort	25h (est)	Development	144 room accommodation Novotel resort hotel 18-hole championship golf course Onsite water treatment facility 25 residential lots + englobo subdivision	Withheld
Key issues
Hotel trading at 50% occupancy, producing a small profit but not an economic return on the premises occupied. Some conference rooms were underutilized. Fragmented ownership of hotel rooms (91 or 144). Room owners returns were poor. Golf was trading at a substantial loss. Dispute with local water provided. c50 vacant 3rd party land lots. Substantial initial cash burn (c$100k per month). Suitable buyer could not be found due to the various issues.
Castlereagh Strategy / Solution
General Caretakers’ agreement resolved and Owners Corp functional. Room owners returns now being paid according to lease. Purchased further hotel rooms to increase ownership stake. Hotel Trading Working closely with Accor to improve performance. Resort shop has been extended to improve retail offering. Converted excess conference space to Retail. Golf Resort membership packages re-launched. Commenced levying of fees from members. Land Highest lot sale since GFC and construction activity increase. WWTP Reached settlement to transfer asset and remove loss.

20-22 Mort Street, Port Macquarie NSW /

Category	Size	Type	Comment	Sale price
Residential units	12 units	Development	12 residual units in completed complex of 24	c$8.0m
Key issues
Location was considered inferior due to distance to Port Macquarie CBD. Several apartments had significant defects including water proofing issues. Previous listing prices were inflated and sales were stagnant. The development went through two separate builders to reach completion. Completed in 2010, comprising of 24 large (~180 sqm) north-facing, 3-bedroom and 3-bathroom units. 12 units remained unsold (six of which were penthouses).
Castlereagh Strategy / Solution
Assessment of defects and litigation with body corporate and builder. Completion of minor defects for marketing purposes. Obtained valuation and reviewed marketing strategy (including pricing). All sold and achieved an average sale price of 2.65% discount to valuation.

136 Dry Dock Road, Tweed Heads South NSW /

Category	Size	Type	Comment	Sale price
Mixed use site	7.6h (est)	Development	DA for tourist resort comprising: 271 units and use of existing premises for reception, recreation and restaurant	$3.75m
Key issues
Site overgrown with vegetation and weeds, which presented a fire hazard. Abandoned tavern was heavily vandalised with all fixtures, windows and electrical works destroyed/stolen. Existing DA not feasible. New local environmental plan would restrict usage. Site included large tidal lake (~2.5 hectares). $2.4m prepaid to Council as contribution fees, in circa 2003 (although DA did not proceed).
Castlereagh Strategy / Solution
Arranged for the site to be regularly patrolled. Lodged insurance claims for vandalism (these were subsequently denied). Commenced a DA for a petrol station on excess part of the site (prior to zoning change), subsequently on sold. The property sold off market at valuation.

11 Ridge Street, Nambucca Heads, NSW /

Category	Size	Type	Comment	Sale price
Vacant site	189h (est)	Development	DA for a 12 unit residential development	$0.465m
Key issues
Site was marketed for sale by a local agent for over 12 months. Limited interest from potential buyers. Approval was commercially unviable – regional areas have limited market for medium density developments. Difficult to secure finance for regional development. Health and safety issues (insurance) due to state of site. Construction commenced in 2008 and ceased in 2010 (some construction materials remained on site). Site location was inferior due to distance from beach. Significant excavation works, concrete footings and blockwork were in place.
Castlereagh Strategy / Solution
Identified and investigated other possible development schemes including consulting with architects, valuers and agents for the site. Appointed agent and arranged public marketing campaign. Contacted own database of potential developers (outside of the marketing campaign), inviting them to inspect the site. Sold within 5% of valuation in a difficult regional development site market.

Outrigger Resort, 22 View Avenue, Surfers Paradise QLD 4217 /

Category	Size	Type	Comment	Sale price
Hotel suites	N/A	Development	104 units in a 404-room hotel complex	c$12.0m
Key issues
Built in 1986, extensively refurbished in 2006/07, and underwent further refurbishment in 2013/14. 104 rooms including: 101 studios (37 sqm) and three 1-bedroom suites (1 x 63 sqm and 2 x 73sqm). The majority of the 414 hotel rooms were under external administration with various financiers that had provided distressed funding to developer. Occupancy leads had reduced from 80% (pre GFC) to c50% (slightly cash flow positive). Value of rooms < replacement cost of construction. Various financiers/receivers were selling stock, flooding the market, and crashing prices. Our appointee needed to exit. Limited market interest for an in one-line sale.
Castlereagh Strategy / Solution
Managed the asset for a period (rather than add more stock to flooded market). Looked for operational improvements with manager. Commenced market sales once stock levels reduced. Identified and negotiated in one-line sale with party off market at a premium to valuation of 12%.

SOHO, 14-20 Market Street, Rockdale NSW /

Category	Size	Type	Comment	Sale price
Mixed use residential and commercial	N/A	Development	103 apartments over two towers Six retail shops	c$54.0m
Key issues
Mixed use development of two residential towers over shops and four levels of basement car parking. Misappropriation of $700k of GST refunds. JV partners (one of which was builder) were in dispute. Builder ceased work. Appointed receivers and managers by financier. Builder refused to come back to site – works ceased at c65% through construction. The project was 5 months behind schedule and at risk of compromising $25m in presales. The DA included a requirement for the developer to purchase a laneway running through the consolidated site from Rockdale Council (price was not agreed and facility did not have provision). Mezzanine financier commenced litigation.
Castlereagh Strategy / Solution
Mediated with the JV parties and negotiated with the builder to return to the site and complete works. Negotiated a settlement with Rockdale Council for the laneway. Completed construction, achieved OC and strata subdivision within seven months. Facilitated full repayment of the senior debt, plus penalty interest and fees. Negotiated with the mezzanine financier to compromise debt, thereby allowing the project to come out of receivership.

Westpoint Group, 2 York Street, Sydney NSW /

Category	Size	Type	Comment	Sale price
Mixed use	N/A	Development	148 units Seven retail/commercial lots	c$100.0m
Key issues
Mixed use development in Sydney CBD. Heritage refurbishment and additions to Scots Church. One of Sydney’s first steel framed high-rise and the largest car stacker (112 bays) in Southern Hemisphere. Nominated for a number of design excellence awards. Appointed receivers and managers following Westpoint voluntary administration. Distressed at Interim OC, bringing the project to a standstill. Union and subcontractor disputes. Numerous defects. Car stacker was not working properly.
Castlereagh Strategy / Solution
Negotiated with the union in relation to unpaid subcontractors allowing workers to return to the site. Completed outstanding works and defects rectifications within four months of appointment. Settled remaining presales and sold down remaining stock. Achieved in excess of $15m in new sales (on average above valuation), allowing repayment in full of the senior debt, plus penalty interest and fees. Assisted in negotiating a release in favour of the first mortgagee from the mezzanine financiers, acknowledging the first mortgagee had compromised its own debt for the benefit of unit holders (retail investors) in the development vehicle.

Portico Plaza, Cnr of Junia Avenue, Cornelia Road and Aurelia Street, Toongabbie NSW /

Category	Size	Type	Comment	Sale price
Mixed use	8,000sqm (est)	Development	Neighbourhood shopping centre with two majors and 44 speciality shops DA for 144 unit residential development above	c$20.0m
Key issues
Appointed receivers to rectify defects, secure pre-committed leases, lease up vacant shops and consider options for the residential site, which at the time of appointment was limited by an unfeasible design.
Castlereagh Strategy / Solution
Retail – secured centre manager, a number of key tenancies to activate rental payment under the major tenancy lease and in the process of finalising sale. Residential – obtained a Section 96 approval to redesign and activate the DA and agreed delayed settlement terms above valuation for sale of the residential stratum.

Javeh Holdings, 85 George Street, Parramatta NSW /

Category	Size	Type	Comment	Sale price
Commercial	7,000m2 (est)	Development	Eight level A Grade commercial tower with retail space and associated basement car parking	c$24.0m
Key issues
Building completed in early 1990s and was substantially vacant after exit of anchor tenant. Parramatta office market was suffering from high vacancy rate. Consultants to supervise exit strategy for unit holders.
Castlereagh Strategy / Solution
Refinanced the senior debt facility, conducted feasibility analysis on highest and best use, facilitated a small area strata subdivision of the building and sold down and leased the strata lots to maximise return to unit holders. Identified and assigned 54 excess car spaces to create a going concern business to increase the gross realisations. Achieved an increase of 50% on financier’s valuation.