What everyone should learn from the Ralan and Steller collapses

By Damian Pearce - August 13, 2019

The recent collapse of two high-profile apartment developers in Australia serves as a reminder to participants in the property sector to get their houses in order.

The Sydney-based Ralan Group went into administration in early August, leaving billions of dollars worth of high-rise projects in doubt, while Melbourne’s Steller Group went into receivership in July, having halted work on an $80 million hotel redevelopment in May.

Pitcher Partners client director Damian Pearce says the situation emphasises the need for businesses involved in the property sector to be vigilant about the financial standing of not just their partners but also themselves.

 “These latest collapses will heighten fears of more distress – and it’s our position that businesses should urgently reassess their own financial positions and those in their supply chains,” Pearce said.

“We have seen repeatedly the implication of a major developer or builder falling over, with shockwaves through supply chains as contractors, subcontractors, suppliers and individuals lose control of cash flow.

“The message of a 2015 Senate committee that identified $3 billion in unpaid debts annually in the sector has not been heeded, with power imbalance still a critical feature of cash-flow related business failures.

“State initiatives to try to head off chain-reaction collapses are still being developed and there’s not a safety net in place.”

Pearce said developer collapses had obvious financial implications for builders and sub-contractors.

However, the fallout also has the potential to impact down-the-chain suppliers of goods and services in ways they might not be prepared for.

“It is important to have documentation supporting ownership for any goods, equipment or supplies held or used by another business – like a bobcat sitting on someone else’s building site,” Pearce said.

“There’s still limited use of the personal property securities register, and many businesses are not across the detail of how their assets could be caught up in someone else’s liquidation or administration.

“A critical step for businesses in the sector who are highly leveraged, or exposed to debtors or contractors who are, is to seek urgent advice from a reputable advisor.”

Damian Pearce is a member of Pitcher Partners’ Business Recovery and Insolvency Services division and can be contacted on +613 8610 5471.

The division operates nationally, with experts in Melbourne, Sydney, Perth, Adelaide and Newcastle, and specialises in advising companies or individuals who are navigating turbulent financial times.

For more information on Pitcher Partners’ recovery, turnaround and insolvency capabilities, visit here.

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