Millions lent to Grocon boss Daniel Grollo to fund luxury apartment spree

Collapsed builder Grocon lent its boss millions which was spent on luxury properties, say new documents that show a complex web of businesses.

Daniel Grollo from Grocon, at the company's headquarters in Melbourne. Stuart McEvoy for The Australian.

The collapsed Grocon building empire lent millions of dollars to owner Daniel Grollo with funds spent on luxury properties in Melbourne and the United States, ahead of its collapse, according to administrators KordaMentha.

The administrator’s report points to the strained final years of the builder as it was bogged down by disputes with heavyweights like Dexus and GPT in Brisbane and James Packer’s Crown Resorts and Lendlease in Sydney.

It also raises questions about its finances across a complex web of companies and lending to entities associated with Mr Grollo over the past eight years, showing the fraught nature of the building and development empire.

KordaMentha say their investigations are only preliminary and a liquidator would be required to probe further. But they recommend against this as returns could be crimped by the Mr Grollo’s constrained personal financial position.

Even tipping his $10m Eureka Tower sub-penthouse on the 80th floor of the famed Melbourne tower into the rescue plan may prove tough as it is subject to a claim from Mr Grollo’s former wife, Kat.

Family Court proceedings started two years ago over Mr Grollo’s divorce and KordaMentha warned these were likely to complicate any potential recovery proceedings against the tycoon and could have a “material impact” on his assets.

The Eureka Towers apartment is an “advanced shell” spanning about 658sq m. It is only partially fitted out with another six to nine months of work required after it stopped.

Agents have indicated it may be sold unfinished but creditors may recoup few funds as a $12m debt facility is secured against the property.

Ms Grollo is making claims against both Grocon assets, including its property, and against Mr Grollo, who is defending them.

Her lawyers Clancy & Triado last month wrote to KordaMentha saying the Eureka apartment should and related facilities should be transferred to her as part of a property settlement.

The administrator disputes her claim and a Family Court hearing was slated for Tuesday, although KordaMentha sought an adjournment till after the deed was voted on next week.

Grocon’s strained final years when it struggled to survive after a development deal soured at Sydney’s harbourside Barangaroo were laid bare in the report.

Even a $3.5m of payments as part of a deal which staved off creditors caught out by the collapse of some Grocon companies in 2019, via an earlier deed of company arrangement via FTI, was flagged as a transaction of interest.

Melbourne’s Eureka Tower. Picture: Nicole Garmston Petersen

It also shows some loans went to Grollo properties like $4.8m spent on a US luxury apartment, where recovery would also be complicated by Family Court action.

KordaMentha identified $30.7m of loans to related parties – including $11.5m to Mr Grollo – as potential voidable transactions and a series of inter-company loans to Grocon entities not in administration amounting to $35.9m, including about $11.2m to Mr Grollo’s funds management business specialising in build to rent projects.

The report also indicated a liquidator may look into Grocon‘s exit from the Barangaroo project as $63.2m was advanced to a Grollo entity known as TT2, which used the funds to repay a high-interest facility with lender MaxCap.

Mr Grollo told the administrators it had to make the payments to avoid triggering a default on the MaxCap facility which would have given it rights over most of the Grocon empire.

KordaMentha said this may warrant further investigation by a liquidator if one was appointed. It declined to comment on Wednesday as did Mr Grollo.

The group fell owing about $100m, including construction bonds to insurers and legal claims it is facing from developers, with a report ahead of a meeting next week to vote on its future showing it staved off going administration despite being insolvent from February 2019.

KordaMentha is recommending creditors take a deed of company arrangement proposed by Mr Grollo, rather than push it into liquidation where some would be left completely out of pocket.

He will tip in $10m but they are mainly being promised benefits if Grocon wins its $270m court action against the NSW government over its treatment at harbourside Barangaroo, for which it has litigation funding.

Critics of the deal have noted that Mr Grollo would not be required to pay back loans out of the Grocon empire that amount to an estimated $90m and could be left with tax benefits even if the court action fails.