Dexus and Grocon continue to fight it out

Dexus and Grocon continue to fight it out

1 November 2019

A dispute between two of Australia’s best-known property companies has boiled over into public after builder Grocon put two subsidiaries into voluntary administration in the middle of a court battle with Dexus over a $28 million lease claim against it by the country’s largest office landlord.

Grocon called in FTI Consulting’s John Park as voluntary administrator of two Grocon units, Grocon Constructors (Qld) Pty Ltd and Grocon Constructors (Vic) Pty Ltd, that it was said were inactive but could frustrate legal efforts by Dexus to get Grocon to pay up, reported The Australian.

Property giant Dexus publicly responded earlier this week over the dispute.

The fallout between the two occurred last year after Dexus demanded repayments of debts relating to Grocon’s 31-level 480 Queen Street tower in Brisbane over a period of three years.

Dexus has now responded, claiming that it and Grocon had entered into an agreement to restructure and extend the payment terms, but that Grocon had not complied with the agreement.

“Grocon has had debts outstanding to Dexus and a funds management partner for more than three years relating to a lease of premises at 480 Queen Street, Brisbane,” Dexus said in a statement to the ASX.

“Grocon entered into several binding agreements to repay the debt owed and had not complied with these, despite repeated requests to do so and Dexus granting extensions to the scheduled payment dates.

Dexus issued statutory demands on Grocon seeking to have the debt paid and Grocon challenged these in court alleging abuse of process.

“It should be noted that Dexus did not commence proceedings against Grocon,” Dexus said.

Dexus said it had adhered to court processes and the next hearing was slated for November 22. Dexus expects judgment to be handed down soon after the hearing.

Grocon, which has multiple business arms, said the decision to appoint administrators to the two entities would not affect its broader operations.

In a statement, Grocon claimed key projects now under construction, The Ribbon in Sydney and Northumberland in Melbourne, would not be affected.

“Voluntary administration is not uncommon in situations such as this but not an option Grocon has ever adopted,” Daniel Grollo, CEO of Grocon said, lashing out at the deterioration of their relationship.

“Grocon has developed and constructed billions of dollars of real estate for Dexus over the years and its attitude to this matter is both unreasonable and disappointing,” Mr Grollo said.

“Unfortunately, Dexus’ reluctance to wait until the court matter is concluded, means that Grocon has been left with no choice. The voluntary administration process will ultimately resolve the situation,” Mr Grollo said.

Dexus has said the process will have no negative impact on Dexus’s market guidancefor the 12 months ending 30 June 2020 to deliver distribution per security growth of circa 5%.

The Australian Financial Review notes that the builder is in separate fights over money with The GPT Group and APN Property Group.