Sth Bnk Stumbles as Cost Blowouts Trip Up Beulah

Despite apartment sales totalling $1 billion, including a $38-million sub-penthouse, Melbourne’s record-breaking Sth Bnk tower has hit a financial wall as soaring construction costs force its project management entity into voluntary administration. The $2.7-billion project at Southbank is on hold as BSSPV Pty Ltd enters administration thanks to wind-up orders by architecture firms Cox Architecture and UN Studio. BSSPV is the project management entity for Sth Bnk by Beulah. ASIC lists Beulah director Jiaheng Chan as the director and secretary of the BSSPV entity. David Vasudevan and Lindsay Bainbridge of Pitcher Partners have been appointed administrators as the project faced mounting pressure from creditors. Advisory firm Slattery Victorian executive director Mark Cathie says in a market where major residential developments are walking a tightrope, Sth Bnk stands apart. “While we’re not engaged on the project, our observation is that it’s a unique project in the Victorian market given its scale, complexity and timeframe,” Cathie tells The Urban Developer . “There has been significant cost escalation over the past four to five years which will have had an impact on the project’s feasibility since its inception to now.” The project’s troubles come despite strong pre-sales. It achieved $400 million in sales on its launch day . More than 80 per cent of its 700-plus apartments are sold, totalling close to $1 billion in sales to date. But an extended timeline has exposed it to sustained market pressures. In December of 2017, Beulah International acquired the 6191sq m site at 60 Southbank Boulevard from BMW for $101 million. Delete Construction deadline In August, 2018, UNStudio and Cox Architecture’s designs for a 365m, 102-storey tower and a 295m, 63-storey tower were announced winner of the project architectural competition. Included are more than 100 shops, a conference and entertainment centre, childcare facilities, and a cultural centre in partnership with France’s Centre Pompidou. The plan for the taller tower includes the world’s highest vertical garden, while the shorter tower incorporates a 210-key Four Seasons hotel . The development won approval from the City of Melbourne in March of 2020 and was fast-tracked by the state the next month. The project expanded in April, 2021 when Beulah acquired the neighbouring 158 City Road property, bringing the total development area to 7706 square metres. In 2023, Beulah announced Multiplex as the builder partner for the project. Construction was slated to start in 2024. The project is yet to break ground. Construction must begin by April of this year for its permit to remain valid, however, the developer may apply for an extension. The scale of the development makes it particularly vulnerable to market fluctuations, Cathie says. “When you look at a project of this type and scale, the impacts can be magnified with a limited capable subcontractor pool across the majority of trades,” Cathie says. “We are seeing less volatility in the market with materials reverting to the long-term average escalation of 3 to 4 per cent annually, but labour shortages, in conjunction with agreed wage increases, continue to impact cost of construction.” ▲ An artist's impression of the Beulah Sth Bnk podium rooftop. Cathie says that from a cost and revenue perspective, it has been an incredibly challenging market for developers over the past two to three years. “All projects have been subject to the same cost pressures over this period. However, there are very few projects, if any, of this scale that have proceeded largely unchanged over the same period.” Sth Bnk not immune These market-wide pressures have had direct implications for Sth Bnk, Beulah managing director Jiaheng Chan says. “Unfortunately, this project—like many others—has been significantly challenged by rapid and unforeseeable cost escalations and other external factors faced across the development industry,” Chan tells The Urban Developer . “The decision to put the project management entity into voluntary administration has not been made lightly.” Despite the challenges, key project partners remain committed to finding solutions. While neither UN Studio nor Cox Architecture can comment on the project status, UN Studio project director Jonathan Riddle confirms the firm is “continuing to work with Beulah to find a route through the difficulties of developments over the past few years”. A Cox spokesperson tells The Urban Developer “the winding-up process was issued by UNStudio and Cox Architecture after a long period of trying to work with the Beulah group to resolve the amounts owing”. “The winding-up application is supported by three other creditors who also joined the Court process as a result of money owing to them by Beulah. Several other creditors have approached us, with the intention of also joining the application.” Searching for solutions The spokesperson says the combined team has “worked closely with the Beulah team to find solutions to address the external influences that both the project and the industry more widely have been exposed to over the past five years, while continuing to investigate Beulah’s brief and project aspirations”. “Despite all of the hard work and effort of the combined team, the market environment remains extremely challenging. However, UNStudio and Cox are continuing to collaborate and explore other exciting project opportunities together around the world.” The financing challenges reflect broader market conditions, Cathie says. “The fundamentals that drive a financier’s decision on whether to proceed with a project remain largely unchanged,” he says. “Key due diligence processes remain as robust as ever, with a greater emphasis on the liquidity of developers, head contractors and their sub-contractors.” ▲ Beulah International managing director Jiaheng Chan and founder and executive director Adelene Teh. ‘Toughest in decades’ Chan says construction cost estimates have nearly doubled since the project’s inception. “This is not a situation we wanted to find ourselves in, but our project is not immune to the cost rises and challenges faced by the broader property market,” Chan says. “Despite our best efforts and those of our partners and creditors, we failed to achieve a target by early 2024 that would have seen us activate construction finance at that time.” Chan says the company will now “pursue an alternative strategy to realise the Sth Bnk project”. The administration follows a broader trend in construction industry insolvencies—corporate regulator ASIC reported 1943 construction industry insolvencies for the financial year to January 26, a 24 per cent increase from the previous year. Intrapac Property chief executive Maxwell Shifman says the Victorian development industry faces its toughest conditions in decades. “The whole housing industry is impacted, but the apartment sector is particularly vulnerable,” Shifman says. Other projects While Sth Bnk’s scale presents unique challenges, Beulah continues to progress smaller projects across Melbourne’s inner suburbs. In Fitzroy, the company is partnering with Breathe Architecture to deliver 44 residences at 430-434 George Street. In Brunswick, Beulah has brought a collection of 23 eco-conscious townhouse dubbed Brunswick Established to market. The project achieved 65 per cent sales on launch day. ▲ A render of Beulah’s The Wilds along the Merri Creek in the Northcote area. In Northcote, the company is constructing The Wilds, comprising 15 carbon-neutral houses along Merri Creek. It is inner Melbourne’s first carbon-neutral detached housing development. The developer has also acquired a site at Prahran at 182-194 Commercial Road, between Prahran Market and Prahran Square, where it plans to deliver a mixed-use residential development. Investigation begins A Beulah spokesperson confirmed the administration is isolated to a management entity and does not affect the landowner of the Sth Bnk project or other Beulah projects. Pitcher Partners was contacted for comment. “We have begun our investigations into the company’s affairs and the circumstances that affected the company’s operations, and at this stage, it is too early for us to comment further,” a spokesperson tells The Urban Developer . You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

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