The NSW Supreme Court has ruled Mark Toma, owner of pub-developer Virtical, to complete the troubled $61 million Taylor Square deal and pay costs to the vendor, MA Financial.
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 Financial, previously known as Moelis Australia, had plans to consolidate and redevelop the two sites to create a major, multi-faceted venue, but later abandoned the plans and listed the assets, citing lacklustre trading conditions since coming out of the pandemic lockdowns.
Mid-2023 new player Virtical appeared, snapping up the Republic Hotel near Sydney Circular Quay for circa $40 million.
In September the group emerged as the new keeper of the Taylor Square twins, offering that it was “well positioned” to pursue the reinvention project.
Virtical went on to find its way into further deals in 2023, such as the Adelphi Hotel in Melbourne for around $18 million. In recent months the company has returned the Adelphi to market, while also pulling out of planned property developments at Southport and Newcastle.
CEO John Palasty offered that they were pivoting, to “focus on our Sydney CBD assets”.
At the end of November last year, in an apparent restructure, Mark Toma was replaced by Palasty, but according to the Supreme Court’s judgement published this week, “Toma remains the sole shareholder of each company”.
Sale of the titles and operations of Kinselas and the Court House were transacted to four companies, an op-co and prop-co for each, all owned by Toma and under the Virtical banner.
The purchasers later negotiated an extended settlement, but when time came, declined to follow through on the transaction. The suggestion was the company baulked because the vendor “was not providing the financial information needed” and possibly that the properties were not in the same condition as when they were sold, nine months earlier.
In June Justice Kelly Rees ordered the companies associated with Virtical to fulfill their obligations in the four sales contracts and pay the balance, by 1 July. ASX-listed MA Financial promptly pursued Toma and the four companies.
When the deadline passed without settlement, MA Financial pushed for orders against Toma, through its subsidiaries, on the basis that he was guarantor.
In his defence, Toma submitted that there was ‘limited obligation’ for the buyers to pay the full purchase price.
In his judgment, Justice Rees disagreed with the defence, ordering that the four contracts be “carried into execution” by Toma, who was detailed as the fifth defendant in the case.
Toma was ordered to pay the balance, specified as “purchase price, interest, and adjustments as required” – plus costs – to MA Financial by 2pm, 23 August.
Palesty declined to comment to PubTIC on the judgement, but it’s likely the buyers will challenge the ruling. They have 28 days to lodge in the Court of Appeal.
