Queen’s Wharf investors face pain after apartment contracts canned

An investor says he will be lucky to escape with his deposit after the Hong Kong developers behind a Queen’s Wharf apartment tower canned contracts, redrew plans and jacked up prices.

An artist’s impression of the Queen’s Wharf apartment tower in Brisbane.

A Brisbane investor says he will be lucky to escape with his deposit after signing up to buy a multimillion-dollar luxury apartment at the troubled Queen’s Wharf casino precinct.

The father of four is one of 800 investors who paid deposits of more than $300,000 for a unit in the luxury 75-floor Queen’s Wharf Tower before being told in December their contracts were terminated due to rising construction costs.

The Australian can reveal that 28 additional apartments and four floors will now be added to the 818 already planned as the Hong Kong-based developers Chow Tai Fook Enterprises and Far East Consortium attempt to make up for rising construction costs and delays. Investors will be forced to pay an additional 12.5 per cent under new contracts.

A spokesman for the developers said that without the contract re-tendering and the additional four storeys, it was unlikely the residential tower would be built.

The scrapping of the contracts comes amid increasing concerns that Queen’s Wharf operator Star Entertainment is edging closer to collapse.

Chow Tai Fook and Far East each hold 25 per cent of the adjacent Queen’s Wharf casino and hotel precinct, with Star owning 50 per cent.

While the tower and two other luxury apartment buildings at the precinct are being developed separately by Chow Tai Fook and Far East and not Star Entertainment, their financial performance could have an impact on the plight of Star.

Star Entertainment warned this week there was “material uncertainty” over whether it could continue operating with revenue plunging in the December quarter, exacerbating its cash crunch amid rising costs at the $3.9bn Queen’s Wharf precinct in Brisbane.

Far East and Chow Tai Fook said they were unable to finish the apartments, some of which sold for more than $3m, under the “current cost or time constraints”.

The investor, who did not want to be named, said he had deposited $400,000 for a three-bedroom unit on the 55th floor of the luxury tower.

He said the unit was an investment which he had hoped would generate capital growth while offering CBD living, but he would now be happy to escape with the deposit and any interest.

“We have been told that the trust fund rules are strict and that the money in that escrow account is secure – but I will believe that only when it’s back in my bank account,” he said.

An artist’s impression of a bar which was to be part of the Queen’s Wharf Tower.

“Contract terminations occur all the time but it is interesting that the plans have also been redrawn to include an extra four storeys to bring in the required capital to keep it afloat.”

In a letter to investors in December, HWL Ebsworth Lawyers partner Melinda Leacy said Brisbane’s construction industry had faced difficulties including soaring costs of materials, labour, supply chain shortages and a limited number of builders.

“The seller has no option but to increase revenue to support the development of the relaunched scheme,” the letter said.

Buyers will also have to pay an additional hike in body corporate fees and insurance costs, which Ms Leacy attributed to “inflation and increases in insurance costs”, for the first 12-month period.

Far East and Chow Tai Fook revealed this week they had started their own construction company FEC Constructions Holdings Australia to control costs on the projects.

FEC, which also has operations in Perth, posted a profit of $6.9m in the year to March 31 last year following a loss of $10.7m the previous year, according to filings with ASIC. Construction revenue during the period grew from $27.9m to $65.3m during the period.

Investors have been told that their deposits for Queen’s Wharf Tower are with the escrow trust and secured. One of the investors told The Australian his deposit alone totalled $1.6m.

HWL Ebsworth Lawyers, who set up the escrow trust account for the deposits last year, told buyers the developer had invested the deposits and it would take time, possibly 30 days, to recover the funds and return to buyer bank accounts.

On Wednesday, a spokesman for the developers said deposits would be returned to all investors who decided not to take up a new offer which included the price increase and rises in body corporate and insurance charges.

“So far 445 of 819 buyers have re-signed the new contract, which is a strong sign of confidence,” the spokesman said.

“We are arranging refunds of the deposits to any buyers who wish not to proceed.

“In addition to this, we are paying the buyer any interest earned on the investment of the deposit, in line with banking requirements, this can take at least 30 days to redeem the investment.

“We are aware of other developers who, in the current climate, have found themselves increasing prices or not proceeding with projects.

“We are extremely passionate about this development and want to see it come to life.”

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Originally published as Queen’s Wharf investors face pain after apartment contracts canned