Struggling Chinese owner of Darwin Port offloads Melbourne property

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The heavily-indebted Chinese owner of Darwin Port, who is struggling to make payments on money borrowed to pay for the port lease, is offloading two large development sites in Melbourne worth $40 million.

The port’s new owner Landbridge Group and its billionaire founder Ye Cheng has put a massive corner block in Melbourne’s Southbank precinct up for “immediate private sale”.

63-83 Kings Way, Southbank.

63-83 Kings Way, Southbank. Photo: Eddie Jim

 

The quick sale of the two neighbouring sites with a planning permit for 780 apartments and retail outlets is a further sign the company may be in financial stress.

A Fairfax Media analysis of the finances of Landbridge Group and Mr Cheng revealed last week that the company was over-extended and scrambling from one loan repayment to the next, in some cases paying interest up to 12 per cent.

Landbridge purchased the 99-year port lease two years ago from the Northern Territory government for $506 million in a controversial deal that saw president Barack Obama express concern about the facility, used extensively by American marines on rotation through Darwin, being owned by Chinese interests.

Landbridge Group is understood to have instructed agents to sell its Melbourne properties, although title records show the two blocks, one at 127-129 Kavanagh Street and the other at 63-83 Kings Way, are owned by Mr Cheng’s wife, Jingxia Liu.

The agent handling the sale, Savills Australia’s Clinton Baxter, said he was in negotiations with several buyers for around $40 million.

At that price Landbridge is likely to end up out of pocket.

63-83 Kings Way, Southbank.

63-83 Kings Way, Southbank.  Photo: Eddie Jim

 

The couple purchased the land at a frenzied point in the property cycle in 2014 for a combined $39 million, a fee that excluded stamp duty and other costs.

Since then Australia’s apartment market has been hit by tougher banking and regulatory requirements and Chinese government restrictions on citizens moving money offshore, crimping demand from developers.

New laws introduced in Victoria this month will also increase stamp duty for property investors by a factor up to 12, just as supply ramps up.

Consultancy group Charter Keck Cramer predicts 25,500 apartments will be completed in Sydney this calendar year, with a further 17,090 in Melbourne.

Southbank is one of the epicentres of Australia’s apartment boom.

Multiple high-rise towers have been constructed in the precinct over the past decade, with many more in planning or proposed.

Next door is a huge open air car park where Malaysian developer OSK Property is set to build a $2.8 billion mixed-use complex called Melbourne Square, one of the largest single development proposals in the state.

OSK recently gained backing for its six-tower, 10-year project from Malaysia’s largest pension fund, the Employees Provident Fund, which purchased a 49 per cent stake for $154 million.

Fairfax’s analysis of Landbridge’s accounts showed the company was also exposed to refinancing risks in China’s volatile debt markets.

The company is also struggling to secure a new debt facility after having promised to spend $35 million upgrading the port over the next five years and fund a new $200 million hotel on a nearby site.

By Simon Johanson
Sydney Morning Herald

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