In the spotlight developer Virtical has offloaded the Republic in the Sydney CBD to industry veteran Chris Thomas for a significant loss.
After bursting into the picture in 2023, spending over $125 million in a matter of months including more than $40 million for the Republic, vexed property developer Virtical has accepted $32 million for the 1865 pub.
In September they signed on to buy the Courthouse and Kinselas development opportunity in Darlinghurst from MA Financial for $61 million.
The energetic new hoteliers touted a strategy of revitalising ‘trophy venues’ with major renovations. At the Republic they had planned a 10-storey addition, containing 98 accommodation suites.
Virtical was established in 2021, then known as Core Asset Development, by 50-year-old Mark Toma. The pub acquisitions took place in conjunction with 69-year-old John Palasty as development manager and senior advisor, who took over as sole director from Toma in November. Toma is believed to have netted $45 million from the sale of his shares in Virtical.
But 2024 has been less fruitful for the would-be high-flying Virtical, racing to offload properties and developments, seeking refinancing and attempting to call ‘no deal’ with MA Financial, sparking a dispute that finally saw the Supreme Court of NSW rule Toma had to complete on the transaction.
And the Financial Review reports that tax returns of more than a dozen companies associated with Virtical have been under investigation this year by the ATO, in Queensland, NSW and Tasmania, over claims of more than $100 million in GST refunds, according to sources.
The AFR is quick to add it [and PubTIC] is not suggesting any of Virtical’s refunds are illegitimate, but notes that the investigation is so broad it could end up one of the largest cases of this type in Australian corporate history.
Separately, it was reported that Palasty has twice been bankrupt and found in 2011 to have defrauded Westpac. He previously ran multiple property companies, which purchased a number of hotels and luxury properties before administrators were appointed, in 2004, with the company owing ANZ $54 million. The bankruptcies came in 2012, discharged in 2015, and again in 2019, discharged in early 2023. In 2022 he pleaded guilty to multiple criminal charges before the District Court relating to contracted building work done without licences or insurance.
Virtical recently listed its Adelphi hotel in Melbourne, citing it was re-focusing on its Sydney assets.
This included concentrating on refurbishment of the closed, heritage-listed Metropolitan Hotel, just a few blocks from the Republic, and reputedly to create “a war chest” for more property investments.
Settlement on the Metropolitan was scheduled for early September, before both sides agreed to a two-week extension. Proceeds from the Republic sale increase the chances this will now happen.
Meanwhile, Toma is understood to be appealing the decision forcing him to settle on Kinselas and the Courthouse.
Sources say the deal on the Republic was direct to Thomas Hotels, which is thought to have plans to occupy the historic CBD pub.
PubTIC was unable to reach Chris Thomas for comment prior to publication.
