At least 14 buyers who purchased apartments off-the-plan at the Royal Plaza in Sydney’s Hurstville suburb are facing the loss of their investment after the developer defaulted on a loan from the lender.
The default by Hua Cheng International Holdings Group raises questions about the protections available to foreign and migrant buyers rushing to acquire property in Australia. It also highlights the role of shadow lenders, many of whom are increasingly stepping in to lend in sectors abandoned by mainstream Australian banks.
The home buyers, all native Mandarin speakers, are considering taking legal action against Hua Cheng after it defaulted on the loan to Chinese-backed Super Vision Resources.
In July, Super Vision Resources appointed EY (Ernst & Young) and Hall Chadwick as receiver and liquidator. They have since seized the 14 apartments that were purchased off-the-plan, as well as another estimated 16 unsold apartments. The buyers, who spoke to The Australian Financial Review on condition of anonymity, are concerned the receiver may auction off the apartments to settle with the lender.
When the 14 buyers paid for their discounted apartments in 2013, the strata plan for the property had not been registered. Moreover, while they’ve paid for the apartments in full, they have not received title and did not complete the transactions.
Some of the buyers had hired lawyers before buying the apartments, and despite being warned not to buy them, proceeded to do so. Other buyers purchased the units without any legal advice.
Lawrence Xu, chief executive of Hua Cheng International Holdings Group, told The Australian Financial Review he was unable to get development and construction finance from the Big Four, but was loaned $35m by British Virgin Islands registered Super Vision. The parties had agreed on an interest rate of 15%.
Super Vision is a subsidiary of China Orient Asset Management Corporation, a state-owned Chinese financial services company.
Xu blamed the lender for the default, saying that after he ran into cost overruns, he renegotiated funding with Super Vision, but the funds arrived five months late, resulting in a construction delay and the slow settlement of apartments.
“They want to enter the housing market in Australia, but they don't really understand the rules and regulations or the way development works here,” Xu said. “The timing of the additional funding was critical to the development. They even sent people over here to observe the project. But they took months to approve the loan, there were so many layers,” he added.
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