$2.7 billion plan to build Australia’s tallest tower falters

Four weeks before Melbourne entered lockdown in March 2020, a group of city councillors gathered in the Town Hall in Collins Street to back a proposal for the tallest structure that Australia had ever seen, one that would have a spiralling green garden wrapped around a 365-metre skyscraper.

The developers – a young married couple with ties to well-connected Malaysian families – were hailed as nothing short of revolutionary during the meeting. Councillor Nick Reece, who has since been elected as the city’s lord mayor, said the “relative newcomers” to Melbourne were poised to deliver the most ambitious project the council had considered in its more than 170-year history.

Beulah’s vision for STH BNK included sky-high gardens and a Four Seasons hotel.Credit: Supplied

Five years on, after buyers paid deposits for 80 per cent of its planned apartments, the $2.7 billion project still doesn’t have a builder. The Melbourne-based developer Beulah, co-founded by Adelene Teh and Jiaheng Chan, was caught out by soaring construction costs in the wake of the pandemic, and creditors owed more than $5 million have taken action to recover their debts.

In one of the most prominent examples yet of Australia’s building crunch, the Millennial developers’ ambition went stratospheric, it turns out, at the worst possible time. Beulah has now engaged Jones Lang LaSalle and KPMG to scout for new investors, partners or a potential buyer of the site in Melbourne’s Southbank district, where construction is yet to start.

“Of course, we remain hopeful it will be completed. STH BNK is not only a significant project for Melbourne, but also for Australia,” said Chan, managing director of Beulah, referring to the name of the development. “The campaign via JLL and KPMG is progressing well, and we expect to receive some good interest.”

Their vision was bold: a “mini metropolis” of about 700 apartments alongside a smaller tower topped by a Four Seasons hotel, not to mention the world’s tallest vertical garden, a wellness centre and a cultural hub operated by Paris’ Centre Pompidou. It promised to transform Southbank, an area better known for its relentless traffic, garish apartment towers and touristy restaurants on the edge of Melbourne’s central business district.

The development provides a stark example of the cocktail of factors behind Australia’s housing crisis that have accelerated since the pandemic.

The development was partly financed by Malayan Banking Bhd, Malaysia’s largest bank, and fast-tracked by the Victorian government, as Melbourne urgently sought to revive its economy in the early days of a pandemic that would eventually lead to the city enduring six lockdowns.

Beulah’s savvy social-media campaigns, including a global contest to choose the eventual design, whipped up a frenzy of interest in STH BNK. That led to more than 80 per cent of apartments being secured by the end of 2023, including a sub-penthouse that the developer said achieved a Melbourne price record of $38 million. Beulah reassured buyers that year by announcing that Brookfield-backed Multiplex, one of Australia’s largest construction companies, had been appointed as STH BNK’s “builder partner”.

A render of the STH BNK project.

Multiplex, which built London’s Wembley Stadium, confirmed that it was no longer involved with the project — despite still devoting a page on its website to STH BNK saying their partnership “follows years of anticipation of who will be tasked with building an awe-inspiring project that pushes the boundaries”. A Multiplex spokesperson said the firm was appointed in an “early contractor involvement” capacity, and was now bound by confidentiality agreements.

Today, a massive placard that declares “Australia’s Tallest Tower is Coming” remains the most visible sign that something is even planned for the site of an empty BMW dealership that Beulah paid $101 million for in 2017. The only evidence that people have been there is graffiti, litter and some cardboard mattresses. A glitzy showroom diagonally across the road was locked on a weekday afternoon, with a promotional video playing continuously on a wall-attached television.

“We have been diligently working behind the scenes on securing a builder, and have been in discussion with a few international and local groups who can build the project within an acceptable timeframe and budget,” said Chan.

While Beulah declined an interview, it provided written responses to questions from Bloomberg.

Beulah says the buyers of the unbuilt apartments have so far been “incredibly supportive of the project as we navigate these changes”. Most buyers are local to Melbourne, with others from around Australia and overseas, Chan said.

Sydney-based Deric Ly, client service manager at real estate agent Global RE, said he helped secure a number of deposits for STH BNK in the past few years, mainly from local clients who put down 10 per cent of the purchase price.

“Everyone’s just being kept in limbo at the moment,” Ly said. “Every customer that I’ve spoken to in the last two, three months is still optimistic and hopeful that the project will proceed.”

Melbourne Lord Mayor Nick Reece.Credit: Joe Armao

The development provides a stark example of the cocktail of factors behind Australia’s housing crisis that have accelerated since the pandemic.

Many projects around Australia have been shelved or stalled as firms that locked in fixed-price contracts got caught out as building costs soared, said Denita Wawn, chief executive of industry body Master Builders Australia.

“We’ve had construction costs going up by 40 per cent over the last five years,” said Wawn, speaking generally. “We’ve had productivity decline by 20 per cent over the last 10 years.”

As Beulah agreed deals with buyers of unbuilt apartments, construction and borrowing costs kept rising, making the project too expensive to even start. That’s despite the collective will of city officials and the weighty ambition of Teh and Chan, who had never built anything on such a grand scale, though they came from a background that promised a path to success.

Teh is the daughter of Teh Kean Ming, who was once CEO of IJM Corp, one of Malaysia’s biggest developers. He is now the managing director of Kuala Lumpur-listed developer JKG Land, and has been described in the Malaysian press as a “formidable property magnate” with four decades of real estate experience.

Chan, 38, is the son of Chan Kong Choy, a former deputy president of the Malaysian Chinese Association political party who once served as transport minister. The elder Chan is now chairman of two Kuala Lumpur-listed firms including Fajarbaru Builder Group, which has worked with Beulah on some projects.

The men, who aren’t named as backers of STH BNK, did not reply to requests for comment sent to their respective employers.

Rising to 319 metres, Australia 108 dominates Melbourne’s skyline.Credit: Luis Enrique Ascui

Teh and Jiaheng Chan both went to the University of Melbourne, where Teh obtained a master’s of architecture degree. Chan studied engineering and initially did not anticipate going into real estate, he said in a 2020 interview. But that changed when his brother-in-law, who was co-developing a glass skyscraper of apartments in Southbank, invited the couple to help raise funds for the venture as part of a Malaysian syndicate.

The building, called Australia 108, is one of the nation’s tallest towers, and is a short walk from the site planned for STH BNK.

But the couple decided that building was their future, and that would be in Melbourne. In 2015, they began developing their debut project as a duo, an upmarket 11-storey apartment building with Australia’s first private dog park. Beulah went on to build a smattering of similar-scaled residential developments around the city.

Maybank funded some of Beulah’s projects, and another backer was Malaysian tycoon Kong Hon Kong. Requests for comment sent to Maybank and KHK Group, Kong’s holding company, went unanswered.

“As we have spent more than half our lives in Melbourne, we are passionate about this city,” said Teh, Beulah’s co-founder. We “are driven to do what we can to continue to contribute to Melbourne as one of the most liveable cities in the world”.

Even as Beulah was making plans for Australia’s tallest building, in 2021 it completed a 48-level apartment tower in Melbourne’s CBD called Paragon. The same year, it bought an adjoining site next to the BMW dealership that allowed it to modify plans for STH BNK, including increasing the space between the twin towers.

In February this year, STH BNK’s financial troubles were publicly laid bare. The project manager vehicle for the towers entered voluntary administration after some creditors issued wind-up orders against it. Beulah then agreed a Deed of Company Arrangement that ended the administration, giving it 18 months to repay creditors by either selling the BMW site or finding an alternative financial solution for the project.

“One scenario is to raise capital for the project, lock in a builder to activate construction financing to keep it progressing; another scenario would be to secure a JV partner,” said Teh. “Another scenario is to sell the site and explore other opportunities. All three avenues are currently being explored.”

And while Beulah hasn’t yet given up on STH BNK, neither has the councillor who so vividly championed the project five years ago.

“I remain hopeful Beulah can overcome its financial challenges and deliver its bold vision for Southbank,” Lord Mayor Nick Reece said in an emailed response to questions. “No one wants empty sites in the city.”

Bloomberg

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