The Continental Hotel on Victoria's Mornington Peninsula looks likely to remain in a state of disrepair after new owners LBA Capital, who purchased the pub last month, had $108 million in assets frozen by the Supreme Court.
The 144-year-old heritage limestone building, which stands on a hill at the entrance to Sorrento and Portsea — the playground of Melbourne’s business elite — has again been the victim of an over-stretched developer.
After the unexpected collapse of his joint partner in the project, Melbourne-based developer Steller Group, hotelier Julian Gerner moved to sell the hotel which has sat for months in a state of disrepair since construction was abandoned on its $80 million redevelopment.
Steller came on board in November 2017 as a joint venture partner after Gerner had put the hotel up for sale again.
Developer Demetrios Charisiou's LBA Capital purchased the “Conti”, as locals call it, for $21 million, in a deal that now looks likely to fall over.
The Supreme Court moved to freeze the developer’s cash and real estate assets after its South Korean-based financiers alleged the developer breached its loan obligations.
Gerner embarked on the restoration and redevelopment before Steller bought into the project in 2017 at close to the peak of the market.
He is the sole owner of the hotel but still has a development agreement with Steller. The sale was necessary he said to conclude the joint venture and make way for a new owner to carry out his vision.
However, new owners LBA Capital which took almost $400 million from South Korean lenders KB Securities and JB Asset Management to invest in government-subsidised National Disability Insurance Scheme, has fallen victim to the housing downturn having purchased land not homes paying top prices for sites at the peak of the market.
“Recent developments have come to light, that have caused serious concern surrounding the capacity of contracted purchaser, LBA Capital, to settle on the Continental Hotel in Sorrento,” Continental Developments managing director Julian Gerner said.
“While settlement is due to occur next month, I am unsure that the purchaser will be able to meet their obligations under the contract of sale.
“I can confirm, I have been aware of an unfolding situation with international investors and have been working day and night to come up with an alternate solution should the sale not proceed.”
“While this produces further complexity to an already complex transaction, I remain passionately committed to the delivery of this extraordinary project.”
Receivers McGrathNicol this week listed seven of Steller's development sites in an attempt to recoup $80 million worth of funds from assets.
The sites are controlled by Asia-based financier OCP which appointed McGrathNicol as receiver over 13 Steller subsidiaries in July.