Public funds $12m of stalled Forster Civic Precinct redevelopment project

The public-private Forster Civic Precinct project on 12,000 square metres of land owned by MidCoast Council attracted $6 million in Federal government funding and another $6 million from council.

Developer, Coyne Graham's Enyoc Pty Ltd was to invest another $3.3 million in works plus $2.7 million in cash to secure the site and its rich redevelopment potential.

But, 18 months after construction started, work on the first three floors of stage one of the high-rise Solaris development has stopped and the promised civic facilities could face "major" delays.

In a confidential briefing to councillors early last month, a copy of which was leaked to members of the community, the MidCoast Council corporate services director, Steve Embry, said the coronavirus pandemic had "adversely affected" the developer's "proposed investors financial arrangements".

"Of immediate concern is that Enyoc have works completed on site by contractors which remain outstanding and they do not have the funds to meet these commitments," he wrote.

"Amounts are due at the end of April and May totalling $2.1 million."

Mr Embry's briefing also showed that the council had paid its $6 million share and the Federal government's $6 million contribution to the developer.

"Council was required to pay the first $12m of work (which it has fully satisfied) and ... the remaining works would be undertaken by the developer as works in kind," he wrote.

"It is these works that the developer is now attempting to fund."

The building work to date comprises mostly concrete and does not include windows or doors.

The building is intended to have a large underground car park, two-level library, a "residents' club" on a third level, retail spaces, landscaping and roadworks. The structure will eventually be topped by a tower containing 53 retirement units.

Based on Mr Embry's May 1 briefing note, the developer needed to come up with at least $8.1 million, comprising $3.3 million to complete the in-kind works, $2.7 million in cash for the council and $2.1 to pay debts to contractors.

Mr Embry said in the briefing that Enyoc was considering three options for finishing the project, including a State bridging loan; a "combination of government grants, investor finance ... and deferral of payment of cash component to council"; and simply walking away from the project.

The final option was the "least desirable" and could result in a "major delay".

He said the council was under no obligation to hand over the land until Enyoc met its obligations, and it had sought advice on its legal options if the developer abandoned the project.

The council still needs to pay to fit out the library and other civic spaces when the developer finishes the "warm shell".

The project has left some in the community, and some councillors, questioning why the council agreed to pay the developer the entire $12 million long before the job was finished.

The job was scheduled to be completed in September this year, but councillor Peter Epov said council had paid its share of the costs at least 15 months earlier.

"Council's paid $12 million so far, and, according to their records, they paid that money over in the 2018-19 year," he said.

Mr Embry was quoted in a council media release in September last year saying that the redevelopment was "progressing well on the timelines agreed ... and it's also financially on track".

The council said this week in response to questions that it had paid the developer in accordance with the structure of their agreement determined at the start of the project.

It said it had recouped two $1.25 million instalments from the federal government and had applied in May for the third payment.

The final instalment would be paid "on completion of the final milestone".

"The structure of the agreement sees the developer pay their contribution of $6m in the final stage of the contract. As it stands at present council owns the land and has a package of security measures under the contract," a council spokesperson said.

The council said it could not disclose details of the developer's financial arrangements, but these had been shared with councillors, who were "satisfied that adequate security provisions were in place in the contract".

It rejected the assertion that Enyoc's inability to pay debts meant it was insolvent, even though its agreement with the developer defines insolvency as "otherwise unable to pay its debts when they fall due".

"The briefing note you refer to was a confidential briefing note for discussion with the elected council," the council spokesperson said.

"As a result it has the potential to be misinterpreted as the full context of commercial discussions is not provided.

"The intent was to advise the elected council that there was a difficulty in meeting the commitments at that time. It did not and does not suggest insolvency.

"The payment of contractors is the developer's responsibility."

Contractors who spoke to the Australian Community Media (ACM) said they were owed money, but they said Enyoc had paid some of the outstanding amounts this week.

Asked whether the project was back on track and Enyoc had found a source of funding, the council said on Friday that this was "part of continuing discussions between council and the developer".

A spokesperson said neither the council nor government had contributed more funds to the project.

ACM attempted to contact Mr Graham, who also built and runs the nearby Evermore retirement village, for comment.

The council's deal with Enyoc includes a $765,000 bank guarantee and a personal guarantee from Mr Graham that his company will perform punctually its obligations to the council.

Cr Epov said the public-private agreement between the council and Enyoc, signed in 2017, made "no commercial sense" from the outset.

"I've been asking questions about this project since it went before the Joint Regional Planning Panel back in 2017," he said.

"The council provided a block of prime land in the heart of Forster which was valued by [former Great Lakes Council general manager] Glenn Handford at $6 million, then a further $12 million in cash, $6 million of which was a grant from the Federal government.

"So, in total, council provided $18 million. The developer was to contribute $2.7 million in cash and $3.3 million in kind ... and for that council gets a rough shell for a library ... and the developer gets over 30,000 square metres of commercial and residential space to sell, plus ownership of the land. To me, it doesn't stack up."

The Solaris website shows little sign of marketing for the apartments and says its home page is "under construction".

The council confirmed late last month on its website that work on the project was "currently on hold due to financial difficulties being experienced by the developer as a result of the COVID-19 pandemic".

Other major construction projects throughout the state have continued during the pandemic, but Mr Embry's briefing note said the council and the developer had agreed to temporarily halt works to safeguard the safety of workers on site.

Mr Embry also noted that Enyoc had met with Lyne federal MP David Gillespie and Myall Lakes state member Stephen Bromhead to discuss securing government loans or grants to complete the project.

Representatives of both MPs said they had not approached their governments about providing more funds.

Then administrator John Turner and Mr Handford signed the deal with Enyoc in August 2017, a month before the first election of councillors to MidCoast Council.

Mr Handford resigned from his council post in December that year and later began working as a consultant for controversial Sydney developer and Tea Gardens land owner Phillip Dong Fang Lee.

Mr Gillespie would not buy into the Forster project's problems, saying only that the project had a "great deal of community support, particularly for the significant economic impact it is delivering throughout the construction phase".

"As it nears completion, locals are looking forward to the many new facilities that will become available when it opens," the MP said.

"I understand council has continued to meet its obligations under the funding agreement, and I look forward to further progress being made on the project in the months ahead."

ACM attempted to contact Mr Handford for comment.