Grocon collapses into administration, blames Barangaroo

He’s become one of the highest profile casualties of the pandemic, but the third generation property scion is not going down without a fight.

Grocon’s Daniel Grollo at the company's headquarters in Melbourne. Picture: Stuart McEvoy

The famed Grocon construction business will go into the hands of administrators this weekend, as the company calls time on its legacy construction companies that were set up by Grocon chief Daniel Grollo’s grandfather Luigi 73 years ago.

The collapse marks one of the highest profile casualties of the coronavirus crisis, and although it had run into trouble on Queensland projects ahead of the pandemic, more builders could find themselves in financial distress as the industry slows.

But the third generation property scion is not going down without a fight and has lashed out at what he calls the “unconscionable” conduct of NSW government agency Infrastructure NSW, over its treatment of the company at the long delayed Central Barangaroo project in Sydney.

That project would have been a $5bn precinct including a landmark skyscraper but Grocon says it was thwarted and sold cheaply to Chinese partner Aqualand, missing out profits of $150m.

That could have made all the difference as the wind-up is for a fraction of this sum but endangers Mr Grollo’s desire to get out of the building game with his head held high in a tough industry renowned for sniping.

The developer launched legal action against the body – and was ordered in September to put up a $1m in security to continue the case – but it is determined to get to the bottom of a secret deal that saw views from projects by James Packer’s Crown Resorts and Lendlease protected and its own scheme decimated.

The Grocon chief executive said he was making the move to administration reluctantly. But he is blaming the NSW dispute for being a drag on the company for years, with the coronavirus crisis only making it worse.

“It is unfortunate that INSW is forcing our hand to place the construction business into administration. While I have spoken before about moving Grocon away from the construction business model to new initiatives such as build to rent, I did not want to call in administrators,” Mr Grollo said.

He insisted that he would pay out creditors, saying they would be first in line if the company won its $270m legal action against the NSW government. But much hinges on winning the case or it being settled in Grocon’s favour.

“My desire is to pay the creditors in full. I believe we will ultimately win the case against INSW and when we do so, the creditors will be the first in line to be compensated,” Mr Grollo said.

The government agency is playing hardball in court, with Grocon saying the costs order was designed to put more pressure on the company’s finances and force Grocon to walk away from the litigation.

Mr Grollo is alleging the Barangaroo Delivery Authority (BDA) was aware for years that the Crown/Lendlease sightlines dispute would impact its design for Central Barangaroo. But it said the authority withheld this information, instead continually confirming the height Grocon could build the commercial and residential towers.

“For almost three years, I was reassured every time the matter of sightlines was raised with the BDA that Grocon should proceed, and we continued to invest millions and millions of dollars,” Mr Grollo said.

That dream has gone but the heat is on the company’s remaining high-profile projects. The Ribbon development in Sydney and the Northumberland development in Collingwood, Melbourne would not be included in the administration entities, and Grocon wants to resolve issues on the sites.

But it has drawn fire from those close to Impact, owner of the Collingwood site, and is said to owe subcontractors up to $8m. And old enemies are never far away, with the union movement chiming in on the “collapse” of Grocon’s construction arm.

The CFMEU said its woes showed the need for effective national security of payment laws to ensure workers, subcontractors and small businesses were not left carrying the can.

“This is a massive rort that has been besetting the industry for decades. The latest Grocon collapse is just like Groundhog Day for anyone who has been around the construction industry for any length of time,” CFMEU National Construction Secretary Dave Noonan said.

Mr Grollo, however, says the root cause has been the actions of Infrastructure NSW. “Many of the financial issues Grocon has had over the years have been because Barangaroo kept getting delayed,” he said.

He concedes there has been numerous “financial effects” and acknowledges the frustration at the Collingwood project. Mr Grollo says he does not begrudge developer Impact getting upset but notes his company has not been paid since May.

He dubbed their dispute complex and emphasised that those on site at Collingwood “are not the enemy”, instead painting them as victims of the Central Barangaroo imbroglio which he lays at the feet of Infrastructure NSW, after it turned on the company.

“I see that as unconscionable and lacking in humanity,” he said.

The combatants are back in court on Wednesday and he is pressing for access to the deal between the NSW government, Crown and Lendlease. “That’s what we want to see,” he said.

The administration won’t slow the court fight and other challenges may lay ahead as Chinese group Greaton weighs up replacing Grocon as builder on The Ribbon project in Sydney.

But Mr Grollo says he is hoping to work though issues on both remaining sites and he has not ruled about putting up a deed of company arrangement but much hinges on the NSW dispute.

“We’ve tried every possible avenue,” Mr Grollo said. “We’ve been the court case and have also been trying to find every other way that we can to create a resolution.”

Mr Grocon is still in the ring chasing developments and doing construction management, including bushfire recovery work.

“We’re certainly not knocked out,” he said. But Infrastructure NSW’s actions could decide the company’s longevity.

The 50-year-old marathon runner is ever hopeful and once the two projects are done with, Grocon will be out of building. It is already using other firms for its build to rent schemes. “And we’re enjoying the experience,” Mr Grollo said.