Veteran developer Luke Saraceni is looking beyond his legal and financial battles, lining up new projects for what he sees as the next ‘historic’ property boom.
Veteran developer Luke Saraceni is looking beyond his legal and financial battles, lining up new projects for what he sees as the next ‘historic’ property boom.
Luke Saraceni was luxuriating in a Phuket resort last New Year’s eve when he got a call from the financiers of the $500 million Raine Square development, Bankwest and Bank of Scotland International, to say they had rejected his refinancing proposal and wanted their money back within a matter of days.
It marked the beginning for an ‘annus horribilis’ for the veteran property developer, who has consistently rejected receiver KordaMentha’s claim that it could not accept any refinancing options for Raine Square because the venture was no longer profitable.
It was a big project for Mr Saraceni and his development partner Hossean Pourzand to take on and the lease deal with anchor tenant and financier Bankwest courted controversy from the outset.
When builders Salta Constructions walked off the site in February 2010 over concerns about payments for variations from the original contract the murmurs over the fate of the new headquarters for Bankwest turned into noisy rumbles.
By early this year receivers seized six properties owned by Mr Saraceni and Mr Pourzand, including the New Esplanade Hotel and 251 St Georges Terrace.
It was a big personal and professional setback for Mr Saraceni, who had built his company Saracen Properties from the ground up.
But, on the cusp of 2012, the veteran developer is squaring up to take on what he predicts will be the property boom of the century and rebuild his business.
“I haven’t had the best business year of my life … I’ve had to sell assets in the worst possible market to fund my operations,” Mr Saraceni said.
“Obviously, I don’t want to sell very good assets and I’ve had to sell them at considerably discounted prices, so it’s had an impact on my net assets and my net wealth but I’ll build it back up again.
“I started with a much smaller amount of money than what I have at the moment and I believe within a few years I will have made back what I’ve lost in 2011.”
Mr Saraceni claims to have four projects on the drawing boards, including the Sirona Capital-backed plan for an $80 million makeover of the Fremantle Myer property and the surrounding Kings Square.
But it’s the critical shortage of office space in the city where Mr Saraceni sees the most lucrative opportunities.
He is working on a 30,000-sqm office project on Shafto Lane that will be built in partnership with the Diploma Group and his experience with Raine Square has not dimmed his enthusiasm for large-scale office construction.
“The next property boom we have in this state will be the biggest one we have had in 100 years,” Mr Saraceni said.
“It will be the modern-day equivalent of the boom that followed the gold rush of the 1880s and 1890s.”
Mr Saraceni said he planned to target office projects ranging from as small as 5000sqm up to 60,000sqm and beyond and he believes he is one of the few private property developers with the skills to play a significant role.
“I have the expertise, the planning knowledge, the ability to do these projects, after all the bank can claim they are going to finish Raine Square but we are the ones that organised the land, the approvals, the plans, the financing and got it 80 per cent finished,” he said.
“A drover’s dog could have brought it home at that stage.”
From across the boardroom table of his richly appointed city office, it’s difficult to discern any sign of the battles Mr Saraceni has fought this year that is until the talk turns to the big banks.
Mr Saraceni is still in legal dispute with Bankwest and Bank of Scotland International over the appointment of receivers to Raine Square and he plans to lodge a claim for damages in the near future, which he is very confident of winning.
“The facts are on our side, they have acted inappropriately and we will prove that in court at the appropriate time,” Mr Saraceni said.
“There was a massive conflict of interest between the bank being the tenant as well as the financier … if you couple that conflict of interest with the GFC and Commonwealth Bank taking over Bankwest and BOSI, our other financier, selling their interest to Commonwealth Bank, all of that led to unconscionable conduct.”
The next act in the Raine Square drama will be played out in court and despite his strident stance, Mr Saraceni recognises he made mistakes along the way, errors he’s quick to point out he won’t make again.
“I assumed, given the size of the project, that we would be working as a team, as I had done many times in the past, with major tenants like Coles Myer and Woolworths but that did not occur from day one,” Mr Saraceni said.
“So what lesson have I learned? Never assume that when times get tough the party you are dealing with will act rationally, honestly and commercially.”
