Information for investors of the George Street Joint Venture ("George") and the Cimitiere House Joint Venture ("Cimitiere").
The Receivers executed a contract for the sale of the George and Cimitiere properties located in Launceston, Tasmania which became unconditional in late December 2010.
The properties were sold via an expression of interest process in line with the requirements of the Court. Settlement of the property occurred on 18 March 2011.
Construction of the Cimitiere property was ‘completed’ in 2009. It was constructed as an environmentally friendly building relying on relatively new ‘green technology’ to ventilate the building.
There have been a very large number of issues with this building. These have included:
- a very large number of defects that have had to be rectified.
- completion of various steps in order to obtain various occupancy certificates, floor area survey etc.
- construction during the receivership of a car park between the properties in order to fulfil the requirements of the planning permits (at a cost of approximately $225,000).
- a number of tenants not meeting rental obligations.
- the re-negotiation of aspects of leases with a number of tenants including retrospective adjustments of rent/outgoings as a result finalising the floor area surveys.
- approximately 15 percent of the building not let.
- commissioning of the ventilation system was not properly undertaken leading to claimed fluctuations by tenants of the temperature in the building. This required substantial investigations into issues with the system and what work would be required to rectify this.
As a result of all of the above, the building was viewed very negatively by the business community and only a low level of interest was shown in the building. Ultimately, only one offer capable of acceptance was made. As a result, the properties were sold below the valuation provided in March 2010 which did not adequately take into account the negative views of the building in the local area.
Based on the sales price achieved, the impact on stakeholders is:
- Receivership funding – The secured lender provided facilities during the receivership period. These facilities are expected to repaid in full.
- Secured debt – The secured debt together with the default interest and the legal and accounting costs of the secured lender are not expected to be repaid in full.
- Unsecured creditors – As the secured creditor is not expected to be repaid in full, it is not expected there will be funds available for valid trust claims against the Trustee of the relevant trust by pre-receivership unsecured creditors.
- Common pool for Investors – As a surplus is not expected after payment of secured creditor claims, there is not expected to be funds available to included in the common pool for Investors.
We will confirm to Investors in due course when this sale completes.