Daniel Grollo apologises for Grocon collapse as creditors seek answers
Construction scion Daniel Grollo has laid the blame for Grocon’s collapse on the NSW government’s stand on the Barangaroo development, but has told creditors he’ll fight on to recover funds.
Mr Grollo opened an at times fiery creditors’ meeting with an apology for the dire straits the company has found itself in, and which forced the building company to call in administrators.
He also came under intense questioning from creditor APN Property Group, which has close ties with his father Bruno Grollo.
The younger Mr Grollo said the meeting was a difficult day in 73-year-old Grocon’s history. The company had wanted to move away from construction during the last few years, but “we have found ourselves closing it down in a most undignified way”.
“Causing pain to employees, creditors and creditors’ employees. For that I am very sorry,” he said.
Mr Grollo took aim at the company‘s treatment in Sydney’s Central Barangaroo project, where he says the company was hurt by a secret agreement between James Packer’s Crown Resorts, Lendlease and the state-backed delivery authority. Grocon has launched a $270m legal action claiming damages from the soured deal.
“The cause of this administration I firmly put at the feet of Infrastructure NSW,” Mr Grollo said, bemoaning the company‘s fall from grace after it won the development rights to the mooted $5bn precinct seven years ago.
“It was a very proud day for our company, the largest project we had ever undertaken. Little did we know then that I would be standing before you today as a result of the subsequent unconscionable behaviour of iNSW,” he said.
“The Central Barangaroo project was taken away from us, we were obstructed deliberately from being able to realise the profit potential of that project. We will continue to pursue this proceeding as a primary initiative of the organisation,” Mr Grollo added.
He flagged hopes of proposing a deed of company arrangements that would see creditors paid out from the proceeds of a court victory. This could leave creditors with a choice between waiting for the outcome of the complicated legal case, to be heard next year, or a liquidation, which could provide only a limited return.
The quantum of money owed to external creditors is relatively small with about 70 third party trade creditors owed between $8.5m and $10m and the Australian Taxation Office owed about $14m. There are also other claims of about $10m, although there is a separate dispute with Impact Investment Group.
But the situation is complicated by about $723m in inter-company loans among entities in administration and a further $318m owing to 31 related companies not in administration. The large sums may not be material to the outcome as they could effectively be netted off.
The meeting was peppered with questions from a representative of APN, who sought to quiz Mr Grollo about nearly $28m which it said had been loaned from Grocon to companies that he controlled.
APN proxy Anthony Simpson said the firm had a $20m claim against Grocon and pushed for answers on the value of its build-to-rent business, which is aiming to have 2000 units under its control with the backing of Singapore sovereign wealth fund GIC.
He estimated the value of management rights of that venture at about $80m and queried whether creditors would have access to this business, which is not in administration.
APN‘s review of the accounts showed that about $27.8m worth of loans had been made to Mr Grollo and his related entities. He sought to question the tycoon on these.
KordaMentha administrator Craig Shepard said he had a statutory duty to look into the loans.
Mr Simpson also sought an explanation from Mr Grollo about putting money back into the business and repaying creditors.
Mr Shepard said it was not appropriate to ask Mr Grollo directly and said he did not want to “make this a personal investigation”. Questions were taken on notice.
Mr Shepard pledged to make inquiries about the build-to-rent business and has sought legal advice on the merit of the Barangaroo legal claim.
The APN representative also queried why creditors would not be entitled to the full proceeds if the case was successful, rather than to be repaid a $22m loan.
A second creditors’ meeting is set for December 23, but KordaMentha will apply to court for an extension, which cold see a meeting pushed back if more investigations are needed.
This article originally appeared on www.theaustralian.com.au/property
