This was published 5 years ago
Developer Kestelman takes Oaks Hotels to court over fees
Developer Larry Kestelman has taken accommodation operator Oaks Hotels and Resorts to the Supreme Court in a $1.4 million dispute over serviced apartment fees.
Sunshine Coast-based Oaks Hotels is a subsidiary of international hospitality chain Minor Hotels and runs an Oaks serviced apartment out of a Kestelman-developed building in Melbourne’s Southbank.
The hotel operator picked up the management rights from multiple individual investors who own apartments in the Opus building at 57 City Road while the building was under development.
Multiplex has ‘topped out’ LK Property Group's 10-level Capitol Grand tower.
But a Kestelman-owned company 57 City Road Pty Ltd alleges Oaks has failed to honour a “rent roll agreement” signed with it and owes $1,408,000, documents lodged in Victoria’s Supreme Court show.
The City Road project was completed in 2016.
Oaks paid the developer the first rent roll installment of $1.3 million that year but failed to follow up with a final adjustment, an avidavit claims.
“We are hoping to resolve the matter. Its a normal commercial dispute,” Mr Kestelman said.
The technology entrepreneur and businessman made his estimated $794 million fortune from the sale of the Dodo internet company in 2013 and the proceeds of 26 years of property development.
He also owns the National Basketball League in Australia, spending $35 million to rebuild the organisation into viable business.
His LK Property Group is constructing the luxury $700 million Capitol Grand apartment complex in South Yarra where the first 10-level tower topped out this month.
Another portion of the 400-unit complex, the 50-level LK Tower, still under construction, is expected to be handed over to buyers in August next year.
About 20 per cent of the project, primarily high-end apartments, remain to be sold but Mr Kestelman was confident they will be absorbed by the market.
“Usually the people moving into those apartments don't want to buy three years in advance,” he said.
In an unusual move, LK Property self-funded construction of the groundworks and basement for Capital Grand.
“I wanted to start quickly. It was not a matter of sitting around waiting. Like every quality developer, I’ve always been happy to put my money where my mouth is,” he said.
“They [ground works] are very time consuming. We were 12 months in the ground. We funded all that ourselves.”
LK Property ended up negotiating lending for the project with merchant bank Goldman Sachs.
The current clamp down by banks on financing property was hurting buyers more than developers like LK Property, he said.
“The banks are very tough these days on end buyers. For quality developers its OK. You have to put in enough equity to de-risk the project for the banks,” he said.
Elsewhere Mr Kestelman's group is planning to replace a reception centre at 622-636 Nicholson Street in North Fitzroy with a 10 level office building.
The plan follows a pronounced shift from apartments to office projects throughout the city fringe and may prove a canny move as North Fitzroy has little or no commercial office space.
Stonnington Council recently approved the group's plans for hotel complex at 35-41 Claremont Street in South Yarra and LK Property has put its foot on another luxury home project at 14-16 Grenville Street in Hampton.
Oaks Hotels were contacted for comment. Mr Kestelman’s company is also seeking damages and costs in the case.