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Developer Grocon places three more companies into administration

Construction giant Grocon has widened its wind-up after quietly placing three further corporate entities into administration on New Year’s Eve.

Grocon’s Northumberland Street development in Collingwood. Picture: NCA NewsWire / Daniel Pockett
Grocon’s Northumberland Street development in Collingwood. Picture: NCA NewsWire / Daniel Pockett
The Australian Business Network

Construction giant Grocon has widened its wind-up after quietly placing three further corporate entities into administration on New Year’s Eve, including its troubled Northumberland Street development.

KordaMentha administrators Andrew Knight and Craig Shepard have been given the job covering Grocon Constructors (Victoria), Grocon Constructors, and Grocon (Northumberland St) Developer.

A creditors’ meeting for the three entities placed into administration is scheduled for January 13.

The three corporate entities placed into administration were notably not included in the much larger administration of 39 Grocon companies in November.

At the time Grocon indicated it had kept the $111m Northumberland Street project and the $730m Sydney project called The Ribbon out of the wind-up in hopes it could continue the projects.

A Grocon spokeswoman declined to comment on the administration appointment but the filing effectively kills off Grocon owner Daniel Grollo’s hopes expressed in December that his construction company could finish the job on the Northumberland Street site.

The Northumberland Street development in the inner Melbourne suburb of Collingwood has blighted the construction giant’s balance sheet, with potential losses of $28m weighing on its bottom line.

The three corporate entities had been put into hibernation by Grocon earlier in the year after contracts on the Northumberland Street project were terminated by the site’s owner, the Impact Investment Group.

At the time Impact alleged it was terminating Grocon due to a lack of activity on the site in the preceding six months.

The building in Collingwood is reportedly 85 per cent complete, but has been blighted by staff turnover and a hit by COVID which interrupted works.

Nearly half of the 144 subcontractors who have worked on the Northumberland Street project were collectively owed as much as $8m as of August 2019.

Many subcontractors who worked on the site earlier in the build have already been paid out.

Citi Build is believed to be owed as much as $1.1m for its work on the Northumberland Street site.

Airconditioning installers OP Industries is understood to be owed as much as $877,000. In December, Maxim Electric Services lodged a Victorian County Court claim against Grocon for $662,105.82 in unpaid invoices.

Cladding Systems is believed to be owed as much as $504,000 by Grocon, and Schindler, a manufacturer of lifts and escalators, is believed to be owed almost $373,000.

Impact is believed to be facing $20m in losses from the project. The group is believed to be looking to continue the project, including last year seeking a deal with Grocon to pay the subcontractors.

A shortlist of three firms has been prepared to finish the $111m Collingwood project. Impact declined to comment.

The latest administration filings by Grocon do not spell the end for the company, which is composed of many corporate entities.

In 2018, Grocon put two companies into administration after a dispute with commercial landlord Dexus, in a $28m spat over unpaid lease obligations over three years.

The 39 corporate entities put under administration in November, which are reported to hold over $60m in debts, are now under the stewardship of Korda Mentha’s Mark Korda and Craig Shepard.

The construction giant has been locked in a Supreme Court battle with the NSW government, alleging it lost out on $270m after a secret deal with the Barangaroo Development Authority, Crown Resorts and rival developer Lendlease capped its potential tower heights.

The potential $270m windfall has been heralded as a saviour for the company’s fortunes.

When Grocon waved the white flag on November 20 declaring insolvency, it effectively ended a 70-year dream run for the construction company founded by Luigi Grollo.

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Original URL: https://www.theaustralian.com.au/business/companies/developer-grocon-places-three-more-companies-into-administration/news-story/357ddce3ce6752179df4de7a66208507