EXCLUSIVE: Altum lacks ‘financial capability’ to deliver GKI
ALTUM Property Group "does not have the financial capability" to build infrastructure on Great Keppel Island, according to a Deloitte report, but the Sunshine Coast-based developer said that the "State Government has been aware since April that the amount of upfront common user and public infrastructure required before the tourism project can proceed is prohibitive for any developer".
A Financial and Managerial Capability Assessment completed by Deloitte for the Department of Natural Resources, Mines and Energy in June 2020, seen by The Morning Bulletin, stated that on June 30, 2019, Altum had net assets of $26.8 million, and despite a "track record of profitability" in the 2018 and 2019 financial years, "does not have the financial capability to complete the project from its own resources".
The report said $375.2 million was required just for the infrastructure component of the GKI development; the entire revitalisation would cost $1.5 billion.
It went on: "We have requested, but not received, more recent financial information.
"This financial information is over 10 months old and the financial position may have changed since that time."
It added that the "realisation" of $114 million of Altum's inventory depended on the sale of homes at Parkridge Noosa, "which may have occurred since 30 June 2019".
Nevertheless, it hedged that possibility, given the effect of the coronavirus on the real estate market.
"These operating results are achieved in [a] normal business environment prior to COVID-19," the report said.
"There [are] significant uncertainties in the current marketplace regarding real estate sales as well as access to capital."
The Deloitte assessment confirmed previous comments by Labor Ministers: Tourism Minister Kate Jones said in August that Altum still had to prove it had proper "financial backing", and last week, Member for Keppel Brittany Lauga said Labor would not sign a deal with a company "unless they have the funds to deliver what they promise".
Altum's GKI Revitalisation Project general manager Leigh McCready said it was correct that "given the total cost of the project is $1.5bn, it was not expected by the state that Altum, or indeed any developer, has this money sitting in their bank account".
"The ability to finance this project has become a whole lot harder because of COVID, and we explained to the government many times since then, that to be able to seek finance partners, including banks, for the project, the massive initial costs of public infrastructure, which is a State Government responsibility, must be resolved," Ms McCready said.
"Only when we have a confirmation from the State Government that have support to provide what would normally exist on the mainland - power, water, roads, sewerage, can we then seek funding for the project.
"We've said it's not really reasonable to expect us to build all that public, common user infrastructure.
"The Deloitte report, which we paid for at the insistence of the State Government, was completed in May. Since then, we have not been asked to update our financial information as both Deloitte and the State Government are aware we are waiting on written confirmation of the infrastructure they intent to support, prior to being able to satisfy the financial benchmark.
"We have requested the state direct Deloitte to revise their assessment of our financial capability based on the definition of Stage 1, which the state announced on August 18."
Ms McCready said that by Altum's reckoning, those Stage 1 works would cost $47.5m.
The government, as per Deloitte's report and the above quotations by Ms Jones and Ms Lauga, wants Altum to prove its financial security before handing over the required land leases; Altum wants sufficient government backing before seeking other investors.
Ms McCready said a letter Labor sent Altum last week "is the closest we've got and potentially the closest we're going to get" to the state providing the money Altum considers necessary.
"[The State Government] seems to be saying that until we can demonstrate that we've got finance partnering to the extent that the project needs, they won't transfer the lease to us; however, in the state's own lease conditions, following the transfer of the leases, we have 30 months to obtain satisfactory finance," she said.
"The State Government is well aware that no proponent will be able to confirm finance for the project before they have the leases in hand."
Labor has $30 million on offer for GKI; the LNP has $25 million, and One Nation $100 million.
The Queensland Government is now in its caretaker period, so Labor cannot sign binding agreements to large projects, but any party can continue to make or change its election promises.
Labor's money ($25 million at the time of the announcement, since increased) will go towards a jetty, boat ramp, shade and seating, walking trails, and more.
Altum did not consider those works a priority, calling them "short-term beautification projects".
"Things like walking trails … they're a short term benefit, but they're not going to help the project get ahead," Ms McCready said.
Tower Holdings has the leases for the government-owned GKI land, and Altum's contract to buy those leases expires on October 30.
"In the agreement we have with Tower, we need to be confident that the government is offering the project the right level of support for public infrastructure," Ms McCready said.
"We need to make an investment decision about what our next job is to ensure we can keep our people employed.
"Even if we wanted to try to extend the settlement date of the contract beyond October 40, there's absolutely no guarantee that Tower would agree to that."