A company behind the $116 million Spotlight site redevelopment in Newcastle is hopeful the project will proceed despite the financial troubles of its joint venture partner and industry construction costs one Hunter developer described as "off its head".
Companies within Sydney construction and real estate development group St Hilliers went into voluntary administration on Sunday, pausing work on 21 construction sites across Australia.
St Hilliers and Spotlight Group secured development approval in October for two 26-storey apartment towers on the former Spotlight site in Newcastle West but put the land up for sale the following month.
Spotlight Group executive deputy chairman Zac Fried said it was too early to tell how St Hilliers' financial situation would affect the sale and redevelopment of the site.
He said interest had been strong from developers willing to take over the project, but Spotlight could choose to buy out St Hilliers' share and redevelop the site "later".
WLP Restructuring has been appointed as administrator of entities within the St Hilliers group.
The Australian Securities and Investments Commission website shows 10 Millers Point-based St Hilliers companies, including construction and property development firms, are under external administration.
The St Hilliers entity involved in the Spotlight site joint venture, St Hilliers Property Investments, is not one of those listed as being under administration.
St Hilliers executive director Tim Casey also put some of his construction businesses into administration in 2012 but regained control of them later that year.
High interest rates, rising costs and tighter financing are putting pressure on builders and development projects in Newcastle and across Australia.
The pace of apartment building in Newcastle has slowed in the past year, though work is expected to start soon on the 100-metre unit towers on the former Store site.
One Newcastle developer said he had received a construction quote for a commercial building which was 40 to 50 per cent higher than he had expected.
"It was massive. The construction costs just don't work. It's off its head," he said.
"The industry is cyclical, but how long will this last? It could take 10 years.
"How are the building costs going to come down? I don't think construction prices are going to come down.
"How do you cut costs out of a building? You take out the beautification."
He said developers also faced increasing costs of providing public infrastructure such as footpaths, kerbs and drainage under council conditions of consent.
"How long will it be before ordinary margins are restored?" he said.
Property agents Colliers and JLL Sydney listed the 0.47-hectare Spotlight site for sale with development approval in place for the two 90-metre towers facing National Park Street.
The "West Village" proposal includes 257 apartments, retail and commercial spaces and an open-air bar.
