Gold Coast Bulletin – October 10th, 2008

RAPTIS Group appears to be close to hitching up its first major financial lifeline, with a deal said to be imminent on the sale of its Hilton Surfers Paradise project.

Market speculation has centred on construction giant Brookfield Multiplex as a likely buyer of the $700 million project, work on which has slowed in the wake of Raptis Group’s emergency debt-reduction program.

Multiplex, the former listed builder of the troubled Wembley Stadium in the UK, is now controlled by Canadian investment powerhouse Brookfield Asset Management and is understood to be seeking value from major development opportunities amid the current economic crisis.

Brookfield Multiplex would neither confirm nor deny yesterday that a deal was in the pipeline, while Raptis Group chairman Jim Raptis did not return calls.

But market sources have confirmed an agreement is close to being finalised.

Last month, Mr Raptis said he was searching for an equity partner to continue with the Hilton development, which is taking shape on the former Dolphin Arcade.

The move was part of a massive asset sales campaign to reduce Raptis Group’s $750 million debt, forced after receivers took control of the third tower of Southport Central on September 10.

While the receivers are now completing Southport Central, Raptis Group has been scouring the market for buyers of its prime Gold Coast assets, including the Sheraton Mirage, the Iluka apartment tower and about 40 apartments in The Sands tower on the Esplanade at Surfers Paradise.

The sales campaign for the Sheraton is close to being wrapped up and, although it has attracted offers from offshore and domestic parties through an expressions of interest campaign, some analysts are predicting the property will fetch less than the $100 million originally expected.

Expressions of interest for the Sheraton Mirage close today.

Marketing agent Dan McVay yesterday said the property had generated ‘a lot of interest’, but he declined to comment further.

Sources say the property could achieve a price of up to $90 million.

Ironically, deteriorating market conditions are said to be the reason behind Brookfield Multiplex taking an interest in the Hilton Surfers Paradise.

Brookfield Multiplex is understood to have been searching the property market for new projects.

Last month, it was forced to close subscriptions to its $165 million Multiplex Development and Opportunity Fund, citing its new focus on large-scale projects in the wake of dwindling opportunities at the bottom end of the market.

The Hilton, with its strong brand and solid uptake from foreign investors, is seen as fitting in with that strategy.

Canada’s Brookfield Asset Management, an investment company that specialises in property, power and infrastructure assets, acquired Multiplex last year in a $4.2 billion privatisation deal.

Brookfield Asset Management controls about $100 billion in assets.

However, the global funding crisis raised doubts this week over Brookfield Multiplex’s $1 billion City Square office tower planned for Perth, despite BHP committing to 80 per cent of the space in the project.

Brookfield Multiplex has denied the tower was in doubt.

Despite market turbulence, Brookfield Asset Management delivered a solid profit of $US307 million ($458 million) for the six months to the end of June, down from $US348 million a year earlier.