Building giant on brink of collapse

THE once mighty Grocon building empire is on the edge, with almost 100 subcontractors on a major development collectively owed more than $5m.

The situation is so dire, the company has not paid some invoices for more than eight months. Even a milk supplier is owed almost $400.

Investors are considering terminating a contract for at least one of the company’s projects, a Melbourne office tower development, where workers are owed $5m.

The investors, including Melbourne’s billionaire Liberman family, are trying to cancel their contract with Grocon for the new Aesop headquarters in the southern capital and appoint a new builder. It is understood Grocon will be making a significant announcement at 9am today, with KPMG understood to have been briefing creditors.

The latest blow to Grocon, run by Daniel Grollo, comes after it failed to lodge a document with the corporate watchdog last month proving that it had enough cash to keep operating.

Impact Investment Group has been in dispute with Grocon over its fixed-price contract for the “architectural gem” that will be the new Aesop HQ.

The group, which has about 100 investors, were angry at Grocon’s last-minute bid this week to save its deal after delaying payment to subcontractors since March.

The property behemoth was given a deadline of midday yesterday to pay the money owed to contractors for March and April.

The company had asked Impact whether it would terminate its contract and pleaded with it to pay the bills for subcontractors from May onwards.

A letter from the Impact group to its investors in the Aesop project, sent in July, revealed significant concerns about the builder. “Grocon has informed us that they are experiencing serious cashflow difficulties. We are taking our own steps to independently verify Grocon’s financial position,” the letter says.

Impact told investors in a letter dated October 30 it was seeking advice from its lawyers and its lenders Maxcap following reports about Grocon’s failure to file its annual solvency notices to the Australian Securities and Investments Commission.

A separate investor update, dated this month, from Impact says Grocon had said in late October it could not come up with its part of the cost blowout on the project. The building, which is almost finished, was now due to be completed in April next year.

It is not suggested Grocon or Mr Grollo have engaged in any improper conduct.