Receivers have taken control of the Republic Hotel in Sydney’s CBD only days after Virtical signed to sell the property to Chris Thomas for a major loss, and as the group is accused of not paying staff Super.
Under the stewardship of Mark Toma and John Palesty, Virtical stormed the pub scene in 2023, prominently buying the Republic Hotel near Circular Quay for around $40 million and executing a substantial refurbishment on the historic pub ahead of plans to add ten residential storeys above it.
Amid a flurry of other acquisitions, the Republic was the portfolio anchor and continued to trade well, beside portfolio brethren the Adelphi Hotel in Melbourne and Hotel Australasia in Eden.
But the winds of change swept Virtical into the news again as the company whirled to meet its commitments, leading to the sale of properties in Launceston and Newcastle, and listing of the Adelphi.
After agreeing to purchase Kinselas and the Courthouse in Taylor Square last September from MA Financial, for $61 million, the four op-co prop-co companies created for the acquisition attempted to pull out of the deal earlier this year. MA Financial objected, ushering the matter to the NSW Supreme Court, which subsequently ordered Toma to settle. He is believed to be appealing that decision.
Although Toma is no longer director or shareholder of Virtical, it emerged he and Palesty lost in the verdict of a recent court case involving works at Hotel Australasia.
This month Virtical was due to settle on its proposed purchase of the closed Metropolitan Hotel, reputedly paying $40 million and recently claiming to be in the throes of a major refurbishment. There have been multiple extensions on finalising the deal.
And last week news dropped that the troubled pub developer had sold its prized Republic for $32 million to veteran Chris Thomas, representing a major loss.
Bond Finance is understood to be the primary non-bank financier for Virtical, holding $90 million in mortgages, covering vehicles associated with the Adelphi, Kinselas and Courthouse.
According to ASIC documents and (anonymous) sources, Bond has issued a default notice and now appointed Peter Krejci and Andrew Cummins of BRI Ferrier as administrators, who have reportedly frozen the Hotel’s accounts.
It’s understood Virtical has a month to get its financial accounts in order or Bond will put its mortgaged properties to market.
This follows reports that the company and associated entities are also being investigated by the ATO over claims for $100 million in GST refunds (which would require business purchases of $1 billion).
And according to the Australian Financial Review, the company is accused of not paying swathes of Superannuation to employees, some said to be owed up to $5K, despite payslips stating Super was being paid weekly.
The payslips led to staff not realising for some time, but have since reportedly made formal complaints to their accused employer and to the ATO.
Although deposits were missing from Super accounts, Palesty, who took over as head of the group, denied the alleged failure to pay Super and threatened to sue the Financial Review for reporting it. He says his accountants have advised that there are Super contributions from the quarter ending June this year due to be paid in September. The ATO mandates that Superannuation must be paid no more than 28 days after the end of a quarter, in this case 28 July.
The Virtical director says he learned when he took over that some payments had been delayed and “promptly addressed” this.
“Since then, all super payments have been made in full and on time,” he told the AFR.
PubTIC has been in communication with former Virtical employees, who relayed that the senior leadership team was stood down “months ago” and allegedly that Super payments have not been received.
Sale of the Republic to Thomas Hotels may now hinge on Virtical’s ability to meet Bond’s expectations, but a party close to the deal says the sale process “will proceed” and will hopefully settle in coming weeks.
Chris Thomas was unable to comment on the matter as it stands.
