The unravelling of the Steller property group has snared Sorrento’s iconic Continental Hotel in its wake, with the historic seaside Melbourne property listed for sale midway through a major redevelopment.
A string of other smaller development sites controlled by Steller have also come on the market, in Balaclava, Cheltenham, East Keilor and Parkdale.
The partnership between Steller’s founders, businessmen Nicholas Smedley and Simon Pitard, fell apart in April as tighter construction financing constraints put the squeeze on developers and other industry players.
At one stage the group boasted a pipeline of $4.2 billion worth of developments and had already built $2 billion worth of properties before it made 76 employees redundant this year.
As apartment sales slowed last year, Mr Smedley flagged the company’s move into aged care and retirement development and management. But that strategic shift does not appear to have saved the business which is run through a complex web of companies.
Colliers International agents Guy Wells and Trent Hobar have been appointed to sell the Continental Hotel at 1-21 Ocean Beach Road and an adjoining site at 23 Constitution Hill Road.
Hotelier Julian Gerner bought the property in 2015 from the Di Pietro family.
The 144-year-old Italianate style hotel, which is heritage listed, is reportedly the largest limestone structure in the southern hemisphere.
Mr Gerner embarked on a $150 million end-value restoration and redevelopment before Steller bought into the project in 2017 at close to the peak of the market.
Construction on the ambitious, staged redevelopment in the popular seaside getaway of Sorrento on the Mornington Peninsula ground to a halt in May as Steller’s difficulties began to bite.
The hotel is expected to fetch about $25 million.
In a statement, Mr Gerner said the restoration had “created some complexity around commerciality and funding”.
“Due to increasingly difficult market conditions I have resolved to take the project back to market,” Mr Gerner said.
Steller is now conducting a major selldown of its undeveloped properties, but has pledged to deliver projects already on the market or under construction.
The company’s unwinding is being felt across the industry.
Last week The Age and The Sydney Morning Herald revealed Sydney-based fund manager Atlas Advisors allegedly has a large $101 million unsecured debt to Steller.
Atlas’ alleged debt difficulties with Steller surfaced in a Supreme Court writ over a separate funding dispute with Melbourne-based developer Bensons Property Group.
Title searches show Atlas slapped caveats last month on a series of properties owned by Steller or the subject of Steller property developments.
Atlas has caveats over a development site at 12-18 Craig Street, East Keilor, a series of houses on Riversdale Road, East Hawthorn, the Parkdale private hospital at 152 Como Parade West and properties in Bittern, Hastings and Mornington.
Other Steller-controlled properties which are on the market include 60-62 Nightingale Street, Balaclava, 23-25 Station Road, Cheltenham, 12-18 Craig Street, East Keilor, a development site at 451-461 Hampton Road, Hampton and 200 Wells Street, South Melbourne.
It is understood that the 1 Brighton Road site in East St Kilda – previously the Greyhound Hotel – is not for sale.
Documents lodged with the corporate regulator, the Australian Securities and Investments Commission, indicate several properties were refinanced on April 1.
Sydney-based One Managed Investment Funds has exposure to Steller’s Balaclava development, which is currently on the market through agents Gross Waddell.
One Managed Investment Funds is directed by Justin Epstein. In a previous life it was known as Allco Managed Investment Funds, part of financial services company Allco Finance Group which collapsed in 2008.
The Balaclava site, next to the local train station, is selling with a permit for a five-level office building.
Both Atlas and another funder, Otway Funds, are registered as caveators over the Keilor East property. Otway Funds’ main trading name is Arcadia Funds Management, a fund also connected to Allco. Arcadia took over as manager of an unlisted fund following a vote by unitholders after Allco’s collapse.
Otway Funds lists Atlas and Mr Smedley as directors.
Mr Smedley was contacted for comment. Steller’s phones were unattended and the company did not return calls.
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