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Market slowdown is still weighing on commercial developers, with Ralan Group becoming the second major developer to fold in the last two months.
The Sydney-based apartment developer was in the process of developing and pre-selling around 3000 apartments in Sydney and the Gold Coast, and leaves behind a debt of over $500 million, according to administrators from Grant Thornton. The collapse also impacts more than 50 of the group's subsidiaries.
Continuing market slowdown is blamed for the news. Despite government efforts to shore up construction, building approval remains at a troubling low, dropping 25.6 percent in the last 12 months, according to the Australian Bureau of Statistics.
“In terms of the operating businesses within the group, it is as far as possible, business as usual", says Grant Thornton Australia partner Said Jahani.
“We are working closely with key stakeholders to identify and preserve value for creditors.”
Still, there is concern for hundreds of apartment buyers who purchased off-the-plan. Jahani believes that the majority, if not all deposits the company received were used to pay the group's expenses, including payment of interest on unsecured loans. Some of these deposits are believed to be in excess of $70,000.
Administrators were called on Tuesday, only a day before Australia's largest cement maker, Adelaide Brighton, announced it was cutting its annual profit guidance by as much as 30 percent. It also follows the collapse of Melbourne's Stellar Group, which was placed in receivership in June.
Ralan Group was founded by William O'Dwyer in 1993, with a focus on the apartment market in North Sydney. It extended into the Gold Coast market in 2015, with the purchase of Pellicano's Paradise Resort for more than $70 million. The group's major projects include The Orchid, a 318-apartment build in Arncliffe currently under review by Grant Thornton, and a flagship, four-building, $1.4 billion Gold Coast development, the Ruby Collection. Valuation of apartments in the Ruby buildings dropped as much as 30 percent last year, causing private lender Mortgageport to turn down loan applications from prospective buyers.
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