A tighter construction funding market, high interest loans and a weakening residential demand has hit Melbourne-based residential and commercial property developer Steller Group hard.
The high-profile development company is now in the process of being unwound with rumblings the company is actively selling all remaining pipeline assets.
Signs of an impending sell down were made apparent earlier this year when company registration documents revealed that one of the company's founding directors resigned from Steller's construction-arm.
It is now understood that conveyancing and building works on Steller's project have been put on hold, and three of its commercial development sites have already been sold off to new buyers.
Founded in 2006 by Melbourne businessmen Nicholas Smedley and Simon Pitard, the business rapidly expanded, building a $4.2 billion pipeline of residential, mixed-use and commercial projects across Melbourne’s southeast.
The development company strengthened with a spate of high-profile acquisitions and by 2016 had over 44 developments under its belt.
The company made a habit of targeting Melboune's suburban residential growth zones with low-rise apartment projects — and very successfully opting for projects ranging from on three to five levels offering between 20-40 apartments per project.
Late last year, Steller made a play for the aged care sector, purchasing the Como Private Hospital in Parkdale.
Signs were positive for Steller last year when the developer settled $232 million in residential dwellings across 10 projects in a month-and-a-half, delivering a zero-default rate.
The developer also struck a deal with Chinese conglomerate Great Aim Group a year earlier to develop at least three residential projects in Melbourne, with an end value of about $300 million.
Over recent months however, Steller has actively listed a number of development sites in an attempt to expedite efforts to wind up the business, after the two men dissolved their partnership.
The spotlight is now on the financing raised to support Steller, which is reported to have been formed through an unconventional capital structure. It is believed to include a number of banks, hedge funds and cheques written by Asian credit-oriented investment and property fund OCP Asia.
There is ongoing speculation that the company had funding problems. The Urban Developer attempted to reach Steller representatives regarding their financial structure but the developer did not respond.
Sites listed include the 19-building Hampton Green project in Hampton Street, eight-storey complex at Brighton Road in St Kilda and 11-storey complex at Chesterville Road in Cheltenham.
While the developer stated it was planning to deliver its remaining projects under construction there are a number of projects up in the air in Carnegie, Glen Huntly, Highett, McKinnon, Frankston, Bentleigh, Moorabbin and Hawthorn East.
Steller acquired a number of residential development sites in 2016 and 2017, coinciding with the peak of that property cycle, including 200 Wells Street in South Melbourne, for which it paid $23.4 million, and a block in Hampton, costing $16.5 million.
It also acquired the former Greyhound Hotel site on Brighton Road in St Kilda, as a permit-ready apartment project, for $7.5 million. Steller moved to sell the asset last August, but has since paused the sales campaign and decided to retain the asset.
It is understood that Steller has also appointed Savills to sell its 1,543sq m site at 200-204 Wells Street in South Melbourne, which has an approved permit for a 20-storey development.
Three of its development sites have already been sold off to new buyers, including 520 Tooronga Road in Hawthorn East.
Work on Steller's $80 million redevelopment of Sorrento’s 144-year-old heritage-listed limestone Continental Hotel has also halted with the future of the Mornington Peninsula landmark project unclear.
The developer also pulled out of a $2 million acquisition of a site adjacent to the Continental, 12 Riley Lane.
Prior to the halt, the joint venture project it started last year with Julian Gerner was well under way, to create a 100-room luxury hotel, dining and events centre.
Stage one included a new bar and bistro, fine dining and function area slated to open late-2019. The second stage featuring a wellness centre, hotel rooms, new lobby, cafe, swimming pool and whisky bar was anticipated early-2020.
Hotelier Julian Gerner is now looking to move away from the project listing the landmark site through Colliers by International Expressions of Interest closing 26 July.