Chandeliers ripped from development by bank receivers

RECEIVERS appointed to an incomplete hotel project by the Commonwealth Bank pulled out $180,000 worth of chandeliers as the developer scrambled to refinance his loan, the banking royal commission has heard.

Former publican Michael Doherty, who was developing the hotel, says the receivers also ripped up a $450,000 cafe fit-out at the site.

Mr Doherty, concluding his evidence at the banking royal commission, outlined how his dream development collapsed as he negotiated with CBAowned Bankwest to try to get it finished and trading.

He said that in 2009 he became increasingly worried about the bank’s interpretation of his financial situation.

Mr Doherty said the business was refereed to the bank’s ‘intensive care’ department due to what he said was an incorrect reading of the accounts.

In June, 2008 – before the worst of the global financial crisis – the property had been valued at $53.5 million. A different “in one line” methodology of valuation was later used, lowering the value of the property significantly.

Mr Doherty said Bankwest refused to sign a three-way deal where hotel and resort operator Mantra would pay $3 million for the rights to manage the property, which was nearing completion.

He acknowledged that he was having cashflow difficulties, and $1.2 million of that money was to go to paying a debt to the Australian Taxation Office.

When Mr Doherty’s company, Doherty Group, could not refinance its borrowings, receivers were appointed in 2011. The receivers refurbished part of the property, ripping out the chandeliers and the cafe fit-out, and brought in Accor group to manage it before the hotel was sold in September, 2013.

Bankwest lost $38 million on the sale.

Appearing at the royal commission, CBA chief credit officer Peter Clark conceded the “in one line” valuation had lowered the value of the Doherty portfolio. Mr Clark said there were a range of factors were at play in Bankwest’s decision not to extend Mr Doherty’s loan, including a deteriorating credit situation and a breakdown in the relationship with Mr Doherty’s company.