Parts of Asian-backed developer Caydon, which has built hundreds of apartments across Melbourne, collapses

Parts of prominent Asian-backed developer Caydon, which has built hundreds of apartments across Melbourne, goes into liquidation.

Parts of prominent Asian-backed developer Caydon, which has built hundreds of apartments across Melbourne, goes into liquidation. Picture: Troy Snook/AAP IMAGE

Parts of prominent Asian-backed developer Caydon, a developer of hundreds of apartments across the Melbourne suburbs of Alphington and Preston, have gone into liquidation, blaming prolonged Covid-19 lockdowns, interest rate hikes, lack of labour and skyrocketing building costs.

Caydon is also developing a $1bn commercial precinct at the site of the old Nylex silos in Melbourne which were once marked out by the iconic Nylex Clock. Caydon bought the mostly derelict site for $38m in 2014 and it has also been targeted by trespassers who have set small fires.

Caydon managing director Joe Russo says the company has delivered more than 3,000 apartments, as well as hotels and offices, in its long history but over the past few years it has dealt with one difficult market situation after another.

The company’s auditors had also warned about its finances even ahead of the coronavirus crisis.

“The latest and really confronting challenge we’ve been facing has been the pricing factors affecting the Australian property and construction industry,” Mr Russo said.

However, two developments under construction — the 324-unit HOME apartment project in Alphington and the 107-unit Due North in Preston — are fully funded and would not be impacted by the liquidation and would continue through to completion and sale.

“The significant disruption to our business created by two years of Covid-19 lockdowns in Melbourne has caused business uncertainty and severely impacted sales,” Mr Russo added.

“Pressure on construction costs resulting in builder insolvencies and supply chain interruptions, and now the interest rate pressures and negative house price sentiment has placed additional pressure on our operations. It has been extremely difficult to make this decision, but to ensure the best possible outcome for all of our partners and customers, we have had to commence the liquidation of part of our Australian business.

“We intend to work closely with the liquidator and all of Caydon’s stakeholders throughout this period to minimise any disruption and are pleased to know that the active projects, being HOME in Alphington and Due North in Preston will continue to be executed and the contractual agreements with our buyers will not be impacted.”

The HOME project in Alphington will not be impacted, the company said.

McGrathNicol partners Matthew Hutton and Matthew Caddy have been appointed receivers following the appointment of Malcolm Howell of Jirsch Sutherland as liquidator.

The receivers appointment to parts of the company was made by OCP Asia which was funding Caydon’s residential and commercial property, sites under development and land holdings.

“The receivers are undertaking an urgent financial assessment of the properties and assets under their control,” Mr Hutton said in a statement.

“We will be working constructively with all stakeholders, including financiers of individual properties, to secure the best possible outcome for all parties.”

“OCP Asia intends to support the receivership process, including through the provision of additional funding, to ensure the properties and assets can be progressed and maintained while options for development and/or disposal are explored.”

The receivers are unsure how many apartments in both complexes are actually sold for finished but expect to know within the next few days.

Caydon was under financial pressure for at least four years and its auditor warned about its ability to continue last year.

The 324-unit HOME apartment project by Caydon residences and communal spaces.

Parent company Caydon Group Holdings had working capital deficiency - with current liabilities in excess of current assets - as at 30 June, 2020 and as at 30 June, 2019.

The company’s 2020 accounts show the working capital deficiency arose from bank loan notes being recognised as current liabilities.

“Subsequently the bank loans have been refinanced at terms that better align with project timelines. Based on the expected continuation of these corporate finance facilities the financial statements have been prepared on the going concern basis,” the accounts said.

The accounts show that in December 2020 the corporate finance facility was refinanced and a new loan notes subscription agreement was signed.

Borrowings listed in the 2020 accounts show secured bank loans which had a current status were at $95.55m and non-current loans of about $253m, with secured debt amounting to about $348.56m.

Caydon Group Holdings also had $86.1m of unsecured loans from related parties listed as non-current. This took total borrowings to about $434.66m in mid-2020.

The company‘s auditor, ShineWing Australia, drew attention to the company’s financial report which indicated that current liabilities exceeded its current assets by $94,270,418 as at June 2020.

The auditor wrote the conditions indicate that “a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern”.

”Our opinion is not modified in respect of this matter,” ShineWing said.

Prices for HOME started at $699,000 and the development was expected to complete in June, 2022 while Due North which was a series of two bedders was expected to complete early next year. Its apartments were priced from $593,000.

The Caydon collapse comes as several developers have pulled the pin on apartment projects in Perth and the Gold Coast in the past week. Of these Central Equity’s decision not to proceed with a $500m project in the Gold Coast was one of the largest.