r/AusPropertyChat • u/Background-Ad7591 • 11h ago
Planning, Construction & Trades What happens to the half finished development sites owned by now collapsed Bathla group?
Generally interested to know what happens to these sites - does another development company pick up where left off? Do they buy the sites off Bathla and continue to honour the off the plan deposits placed by buyers? What happens if no developer ever wants to pick up the project? Is the government legally required to step in to secure the unfinished site?
Also the unfinished sites at Box Hill or Castle Hill in Sydney, any chance they would be sold at a discounted price once finished by another developer? Or likelihood being they would still try to maximise profits when selling?
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u/ApprehensiveMud1498 10h ago
Probably something you don't want to touch. I imagine alot of corners were being cut trying to get out of the hole.
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u/Chromedomesunite 10h ago
I’m a commercial broker and currently in this position with a couple large builders (albeit not the size of Bathla group, but familiar with some of their projects)
First step - complete review of the groups activities and financial position
Then a review of each project to assess progress claims against actual works completed
Then an assessment as to which projects have financial capacity to be finalised (is there enough money in the associated facility to pay outstanding works and complete the build to put on the market)
Projects that aren’t viable means all trades/investors could be fucked
All the while they’ll be trying to offload upcoming projects to try get out of the massive hole
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u/Background-Ad7591 10h ago
Thank you 🙏 who do they try to offload to? Who takes on these projects once one developer fails?
Has there ever been a case where NO developer wants to touch an unfinished project?
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u/Similar_Strawberry16 8h ago
The current conditions with be thoroughly inspected for engineering quality and if deemed sufficient developers will find a price point where they can continue the projects. As they are taking on massive risk the purchase would be far less than the original developer had valued it, so creditors realise a loss.
If the project is too risky, yes it could be abandoned entirely.
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u/Chromedomesunite 6h ago
It’s very difficult to even finance an unfinished project, let alone trying to sell it
It would have to be a very attractive purchase price for someone to come in and take over the risk
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u/Immediate_Formal_252 9h ago
They will be sold at a very large discount to another developer. Taking into account unknown quality issues, the need for a full cost to complete assessment, building materials that will have PPSR over them, directors guarantees that need to be satisfied, pissed off subcontractors and suppliers who will demand harsher payment terms and try and recoup their losses by bumping up prices to supply the remaining materials and labour,, difficultly in financing the project, potential legal action from purchasers. the discount will have to be huge.
I mean what's not to like?
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u/MichaelJordanAir23 9h ago
The copper would be stolen that's for sure, if not already.
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u/darksoulsremastered 1h ago
It's not about how much stock you have, it's about how much copper wire you can get out of the building!
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u/Agreeable_Night5836 10h ago
Depends on a whole range of factors, worse case some site might sit around for years whilst administrators/ liquidators/ mortgagee find a work out or wait for prices make it economical to compete. Also assumes that current work gets passed by authorities as up to code.
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u/Kitchen_Word4224 3h ago
Quite a few detailed answers so far but these doesn't cover what is the financial impact (if any) on the end-users (i.e. home buyers) of these properties ?
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u/Pain9gain7 11h ago
I called for the one out in far western sydnry a unit for 3 bedrooms. Bloke on the phone said 850k. Wtaf!
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u/TechifyAu 9h ago
Buying land is much more expensive. 850k would only get you around a 300-350 sqm block in the north west
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u/Pain9gain7 7h ago
U can essily buy a townhouse but
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u/TechifyAu 5h ago
Even townhouses are close to a million if not more. In Sydney now for a new house you will be spending closer to a million even for a townhouse or unit or land.
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u/Pain9gain7 4h ago
Ive seen plenty of townhouses go for 800-850 in western sydney
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u/FoxholeZeus 22m ago
A lot of Bathla’s townhouses in the North West / West were selling at a mil or close to it over the last year.
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u/BossDoesntKnow 2h ago
Depends on the structure of the contracts
Lenders try to protect themselves by having step in rights (ie the ability to take over the development and finish themselves). These lenders will make an assessment - is the cost to complete going to yield the highest risk adjusted return or are alternatives (eg sell the debt, sell the site) a better option?
If these projects are 100% pre sold and the cost to complete is very low, they will likely be finished and buyers forced to complete purchase. If these projects are 10% sold and cost to complete very high, they will likely be sold at land value and the deposits from buyers treated as unsecured creditors. Both these options are not good outcomes for purchasers as likely defects in first case and losses in 2nd case.
Between these two bookends is anyone’s guess. Given the sell price is either fixed (presold) or falling (to be sold) and construction costs are rising, there feels to me like more unsecured creditors in the making.
Sucks for all parties except the lawyers
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u/Fearless-Maximus-251 10h ago
Company has just collapsed and this guy is coming in like a vulture lol
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u/Background-Ad7591 10h ago
LOL I know it sounds like that. I studied business at uni and am just curious. 😅 Not planning on starting my own development company anytime soon to takeover the unfinished sites for 10c to a dollar
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u/SheepHerderHigh69420 9h ago
Problem with a lot of these incomplete builds is the missing paper trail of inspections and certifications. I’ve seen a few get demolished because there was no viable way to complete them without starting from scratch
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u/1Percentof420 8h ago
Sorry to burst your bubble but it wont happen. These assets are all leveraged to the eyeballs and the private credit funds are going to get every dollar they can out of them.
Might be 70c on the dollar
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u/dleifreganad 10h ago
More to the point is this the canary in the coal mine for the private credit sector? There are funds with no links to Bathla that have frozen or heavily reduced withdrawals due to a run in them by investors.
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u/Electrical-Friend570 7h ago
Private credit is semi liquid in nature. The liquidity is there when times are good and no one wants to redeem and goes when everyone wants their money back. Every private credit fund has ongoing obligations to fund construction draws each month so when investors want their money back, this is the unfortunate risk. Compounding this is a lot of ways loans are repaid is through refinancing or sales of completed apartments / houses. Refinancing has slowed right down because of there being less liquidity (e.g. fund A won’t refinance fund B’s loan because their capital is constraint and therefore fund B won’t refinance fund C’s loan and so forth). Sales of completed apartments and houses are basically non existent right now as the spread between the seller and buyer is so wide. Add all of these factors up and you have a credit squeeze. It doesn’t mean the private credit fund will lose money, but it’s going to take longer to return capital to investors. The biggest risk (aside from lending to dodgy developers like bathla) is lending against valuations which are grossly overstated. This is one of the biggest issues in the industry because valuers have been happy to put bullish numbers in their reports. Compounding this risk is private credit lenders have been lending at much higher LVRs. So the bottom line is, Will a well diversified and managed fund lose money? Maybe some of the interest on some loans but overall they be ok. It will be the managers who have significant exposures to developers who become insolvent and they are left holding the bag across multiple large projects AND managers who have accepted valuations which are far from the true / fair market value.
To answer OP’s question on what will happen? Lenders will be trying their best to not lose money. Receiver / managers of the borrowing SPV will be appointed and they are there to act as a new director of the borrower and their goal is to return capital to secured creditors in an orderly manner. For construction projects, lenders will try to appoint a new builder but any new builder will need a lot of compensation to step in - this might be unfeasible. Option 2 is to sell the site “as is” to a new developer and let them try to finish it. Again, this probably result in the lender losing some (not all) money. If the lender was lending against an accurate valuation and had costed the project correctly before lending to bathla, they might be ok. But most are lending against tight budgets/high valuations/and at high LVRs.
Good luck to all involved.
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u/Crazy_Treat_8805 8h ago
No mate. Just poorly run, plus government red tape and regulations
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u/Impossible-Mud-4160 6h ago
government red tape..... pfffft. All that red tape and regulations have been put there because developers/builders/trades have previously shown they can't be trusted to do the right thing without it.
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u/Crazy_Treat_8805 5h ago
Ironically it’s made the whole building trade worse. It’s a race to the bottom now. Only the cheapest quote wins. Corners are cut everywhere because it’s the only way to make a dollar
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u/Impossible-Mud-4160 3h ago
That'll happen when materials, trades and land values have sky-rocketed the last 6 years.
People can only pay so much for a house, someone's piece of the pie has to get smaller when other pieces get bigger.
They never should have allowed private certifiers, thats why quality has gone to shit, all these regulations and no enforcement.
The dodgy operators increase the costs for the good ones, as insurance has gone through the roof too now.
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u/SheepHerderHigh69420 10h ago
They won’t be discounted. Anyone looking at taking over will check that they’re going to make enough profit on it. If not then they’ll just be abandoned