Chinese billionaire Li Fucheng has gone to court for redress after a deal over a $220 million development project west of Melbourne turned sour.
The dispute comes as major offshore developers, such as Dahua and the Fucheng Group, turn their attention to Melbourne’s greenfield market, where buyer demand has pushed lot prices up more than 30 per cent in the past year.
The location of the disputed land is the famed Eynesbury estate, once owned by the Baillieu family, but since sold down and carved up between various interests.
The Fucheng Group owns a large 4953-hectare section of the former estate, after buying the last remaining parcel of the Baillieu family’s Woodhouse Station for about $100 million in August 2016.
But the lawsuit filed in the Supreme Court of Victoria centres on a much smaller parcel of land, which Fucheng Investment Australia acquired from developer Francis Kwong’s Hyde Property Group around the same time.
Fucheng has accused the local player of selling the land – through its Eynesbury Property Development, a vehicle controlled by Francis Kwong’s son Errol – with only half as much potential lots as it had been led to expect.
Lots of problems
Fucheng bought land on Green Hill Road for $30 million in the belief it would generate 1020 lots, according to its claim.
As part of the deal, it is alleged, there was an option to include lots from land retained by the Kwong to make up the shortfall if the Green Hill parcel did not generate the expected lots.
But Fucheng can only obtain 521 lots from the land it bought. Worse, it could only get 368 lots out of the make-up portion from the Kwong-held land as agreed.
Another stage of Kwong land could feasibly yield 152 lots, according to the claim, taking the potential total to 1041 lots.
During a meeting at his Toorak home in November 2016, Mr Kwong agreed to transfer the extra lots to Fucheng, it is alleged.
But to make good on that alleged commitment, Mr Kwong would have to subdivide the land and transfer the parcels to Fucheng. That has not happened, it is alleged.
According to Forbes, Li Fucheng is worth $US1.1 billion with business interests spanning cattle breeding, beef processing, real estate and funeral services.
Three years ago Fucheng Group also acquired the 31,000-hectare cattle-fattening property Woodlands for $28 million from London-listed M.P. Evans, part of a wave of rural acquisitions by high-profile Chinese groups.
Fucheng has taken its allegations a step further, alleging the Kwong side engaged in misleading and deceptive conduct when they showed the Chinese developer a plan and feasibility report for the costs and revenue for a 1000-lot development at Eynesbury.
The plan “depicted 1020 lots in a configuration that was never capable of being achieved”, the writ alleged.
As well, the feasibility report showed projected revenue from lot sales without disclosing that Eynesbury Property Development “had not completed or settled the sale of any lot in the Eynesbury Township with any residential purchaser during the previous eight years”, it is alleged.
A text message sent from Mr Kwong to the Fucheng side allegedly stated the average land size was 600 square metres and the total area 60 hectares. “We can sell for $220k per lot”, it allegedly said.
The case is still to be heard and the Kwong side is yet to file a defence. A spokesman for the Hyde Property Group declined to comment.