Waves project underwater
Phillip Island Motels, which had been controlled by entrepreneur George Frew and his family, was put into receivership nearly two years ago after property investors shunned the development at Cowes. The liquidation is the latest setback for the one-time international hotelier and racehorse owner, bankrupted in the wake of the Tricontinental bank collapse in 1980s.
George, wife Natalie, and son Stephen built the multi-stage project on The Esplanade to sell to investors and then lease back and manage some of the apartments as tourism accommodation.
"There were 120 units built over 10 years, and the last 55 were under way when we crossed the line in the GFC," director Stephen Frew said. "People stopped buying, there were problems with the builder and the pre-sales fell over."
The company owed $7.97 million to National Australia Bank at the time Phillip Island Motels was put into administration in mid 2011, with the debt secured by 31 apartments and several operational spaces in the complex. Unsecured creditors, including the Tax Office and Bass Coast Shire, were reportedly due $220,450, according to documents filed with ASIC.
Ross Blakeley, managing director of receivers FTI Consulting, said The Waves struggled to make sales in the "depressed and competitive" conditions of Phillip Island's holiday accommodation market, and the development and operational costs of the project could not be met.
The management company for The Waves, Harbour Apartments, which was also run by the Frews, is also in external administration with debts of $918,500.
Knight Frank was appointed to sell 31 apartments in stages four and five of the project in late 2011, which has continued to operate during the administration. All the units sold for $155,000 to $245,000 each, with a source saying prices achieved were below valuation. FTI Consulting excluded the valuation information from ASIC filings on the grounds it was of a "commercially sensitive nature" that might "prejudice" the sale of the company's assets.
"They had a bit of a fire sale. The bank did themselves a lot of damage with the underselling," Mr Frew said.
Liquidators Brooke Bird, appointed in early April, report Phillip Island Motels stills owes about $4 million to the bank and $87,395 to unsecured creditors.
The Frews continue to manage the accommodation operations.
cvedelago@theage.com.au
Twitter: @chrisvedelago
Frequently Asked Questions about this Article…
The company behind The Waves apartments, Phillip Island Motels, has been placed into liquidation after a sale of assets still left the group with more than $4 million in debts. The project suffered falling pre‑sales during the global financial crisis, builder problems and weak holiday‑accommodation market conditions on Phillip Island, which left the development unable to meet its costs.
At the time Phillip Island Motels went into administration in mid‑2011 it owed about $7.97 million to National Australia Bank, debt secured by 31 apartments and some operational spaces. ASIC filings previously showed unsecured creditors (including the Tax Office and Bass Coast Shire) were due about $220,450. Liquidators later reported the business still owed roughly $4 million to the bank and about $87,395 to unsecured creditors.
The Waves was developed and controlled by entrepreneur George Frew and his family — George, his wife Natalie and their son Stephen Frew. The management company for The Waves, Harbour Apartments, was also run by the Frew family, and the Frews continued to manage the accommodation operations even after administration.
Knight Frank was appointed in late 2011 to sell 31 apartments in stages four and five of the project. The development continued to operate during administration, and the units that were sold achieved prices between $155,000 and $245,000 each — reportedly below prior valuations. FTI Consulting excluded valuation details from ASIC filings as commercially sensitive.
Receivers from FTI Consulting were appointed to manage the assets and sales process after the project hit financial trouble. FTI said The Waves struggled to sell in Phillip Island’s "depressed and competitive" holiday‑accommodation market and that development and operational costs could not be met, which contributed to the need to sell assets.
Harbour Apartments, the management company for The Waves and also run by the Frew family, entered external administration and was reported to have debts of about $918,500.
Stephen Frew said the project built 120 units over 10 years and the last 55 were underway when they "crossed the line in the GFC." After that, people stopped buying, there were problems with the builder and pre‑sales collapsed. Combined with a depressed local holiday‑accommodation market, the project could not generate enough revenue to cover development and operating costs.
The article highlights risks investors face in property developments: reliance on pre‑sales, sensitivity to market downturns (the GFC was a factor here), the impact of construction or builder problems, and the difference between secured and unsecured creditor positions. In this case some apartments were sold at prices reportedly below valuation, and the management company also went into administration — illustrating how development setbacks can affect both developers and investors.
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