The big-ticket sale of Kinselas and the Courthouse Hotel by MA Financial to operator-developer Virtical has fallen over, with parties now arguing the specifics in court.
Last September news broke that Moelis was divesting the pair of pubs at Taylor Square to the private company for just north of $60 million.
The unlisted MA Taylor Square Fund acquired the prominent Courthouse Hotel on Oxford Street for $22 million late 2020, and the following month picked up the adjacent Kinselas from the Kospetas family’s Universal Hotels for $45 million.
MA had explored plans to combine the sites to create a major, multi-faceted venue, and Virtical offered that it was “well positioned” to pursue the project.
But after an extended settlement, Virtical declined to settle on the transaction. MA responded by lodging a suit in the Supreme Court.
The parties returned to court today for a directions hearing around details to be submitted.
After both sides were given extension until the end of the day to present their case, neither has yet had opportunity to review evidence tendered by the other party, and cannot offer comment before having opportunity to do so.
The SMH reported Virtical CEO John Palasty saying they had not completed and the contract had been terminated because the vendor “was not providing the financial information needed”. It’s also suggested the properties are not in the same condition as when they were sold, nine months earlier.
Redcape CEO Christopher Unger offered that market conditions had deteriorated since the second half of 2023, while construction costs had increased – both of which negatively impacted the viability of such a development.
Pending the outcome of the case, Moelis will likely try again to sell the properties and opportunity rather than pursue the development, having already cited changes in both the construction and funding markets as its reasons for selling last year.
“The original investment strategy was dependent upon favourable trading conditions emerging from the first COVID lockdown, and the anticipated resurgence of Oxford Street following the repeal of the city’s lockout laws,” said Unger at the time.
It’s suggested the failure of the deal is another “potential blow” to the rejuvenation of the Oxford Street precinct, which has seen a disturbing number of empty shopfronts and is thought to be suffering something of an identity crisis in the current post-lockout low-alcohol and high cost-of-living economy.
Major construction work is taking place along several blocks, where AsheMorgan is reworking three buildings leased from council and the city is installing the Oxford Street cycleway. And amid lacklustre trading conditions throughout the city, the strip’s iconic Stonewall bar has announced it will not be opening on Monday or Tuesday nights for the duration of winter.
But it can also be said this is the time of year to be doing disruptive construction work, and potentially down-sizing trading hours on the less exuberant evenings.
Meanwhile, venues report trade on a Saturday night is strong, and the Darlinghurst Business Partnership’s Stephan Gyory suggests it may be better if the Kinselas-Courthouse redevelopment did not proceed, as it would mean less construction.
The matter will return to court Monday.
