Daniel Grollo. Image source: Herald Sun.
What began as a family business in 1954 and has grown to be the group responsible for some of Melbourne’s most iconic buildings, is now embroiled in financial issues that could see the company’s demise.
Grocon has been in a financial tailspin for a number of years, and the group’s failed development in Sydney’s Central Barangaroo project is said to have set in motion a domino effect of entities in administration.
But it wasn’t always unpaid debts and administrators.
Founded by Luigi Grollo in Melbourne in 1948, the Grollo Group began as a one-man concreting business, completing small jobs like shopping centre car parks and swimming pools.
When Luigi’s sons Bruno and Rino joined the business, the Grollo Group transitioned from building local projects to some of Melbourne’s best-known landmark developments.
Moving to Darwin in the 1970s to rebuild homes destroyed by Cyclone Tracy, Grocon became known as a trusted builder outside of Melbourne, and would continue to be contracted for clean up and recovery following devastating bushfire seasons.
Following this, the company began to diversify its project offering and became a key player in the Australian construction industry, developing and constructing buildings across a number of sectors including residential, commercial, education, retail and tourism.
The Projects that Defined Grocon’s Success
The 1980s saw Grocon become a household name, with the delivery of the company’s first integrated development and construction project, the Rialto Towers at 525 Collins Street.
Completed in 1986, the Rialto became Melbourne’s first skyscraper, and for a time the tallest building in the southern hemisphere. The Rialto building is the only major Grocon development still owned by the Grollo family.
In the 90s, Grocon was contracted to build the Crown Entertainment Complex, transforming Melbourne’s Southbank into a veritable lifestyle precinct.
The complex, completed in 1997, features three hotel towers set across 510,000 m2 of space, equivalent to two city blocks, making it one of the largest casinos in the world, and one of Grocon’s most memorable builds.
In 2002, Grocon began the 4-year construction of the Eureka Tower in Southbank. Upon completion, the tower was the tallest residential tower in the world, and until 2019 the tallest building in Melbourne, at 297.3m (it was then topped out by the 316.7m Australia 108 tower).
In the 90s, Grocon expanded into Sydney, working on landmark developments such as one of Sydney CBD’s largest office developments, the Governor Philip and Governor Macquarie Towers at One Farrer Place.
Grocon also successfully delivered 1 Martin Place, which saw the restoration of the GPO Heritage Building and inclusion of a 24-storey office tower and hotel.
Turning Points in the Grocon Empire
In 2000, the Grocon business was split into two: the construction arm would be owned by Bruno Grollo and his son Daniel, while the development business, which included Equiset and Grollo Group, went to Rino. The half that went to Rino included the family’s 50% share of the Rialto building.
In 2012 the construction business was split yet again, this time separating into a construction business to be owned and run by Daniel Grollo, and a property development business owned by siblings Adam and Leeanna.
The division of the business meant Daniel assumed control of the group and all building and development projects in the pipeline, whilst assets were either sold or spun out. The idea was to take a proactive approach to the business ownership and create a mutually beneficial result for Bruno Grollo’s three children.
A year into Daniel Grollo’s ownership, the wheels began to fall off the bus. His hardened stance on unions in an effort to ‘get sites under control’ resulted in a famous clash with the CFMEU at the site of the Emporium shopping centre on Lonsdale Street, lasting four days. The Supreme Court of Victoria ruled the union directed crowds to obstruct access to the site. Grollo called the behaviour “threatening and lawless.”
The 2012 succession also decapitalised the company, forcing it to run on tight margins and on-sell development rights for finished projects in order to pay out debts and bid on new builds.
This is what Grocon did with its interest in the Central Barangaroo project in Sydney. In 2019, Grocon pulled out of the consortium appointed to build the $5 billion development and sold development rights to the $1.4 billion office component to Chinese company Aqualand.
It is alleged the funds from the sale were used to pay creditors including Dexus, to whom it owed rent in arrears as well as the cost of dispute resolution, for the 480 Queen Street building in Brisbane which Grocon had built, sold to Dexus, and then rented. The two-year stoush ended in the Federal Court.
Grollo’s economic mismanagement extends further than unpaid rent. The Brisbane tower also ran over budget, and Grollo was forced to cover these costs with his own money, which it turns out he had borrowed from another Grocon subsidiary.
The fallout from the Dexus case forced Grollo to place two Grocon subsidiaries into voluntary administration in October of 2019.
A year on, with 42 Grocon subsidiaries in the hands of administrators, Daniel Grollo alleges the trouble began when Lendlease and Crown Resorts secured the rights to unobstructed harbour views for the Crown tower in Barangaroo.
Grocon is now involved in a court battle against Infrastructure NSW, seeking $270 million in damages on the basis the Barangaroo Delivery Authority withheld the fact that Crown tower would impact the final design of Central Barangaroo, forcing Grocon to withdraw from the project.
Daniel Grollo maintains Infrastructure NSW is to blame for the construction company’s demise, while the government agency argues Grocon’s financial woes predate the harbour drama.
Could The Collapse Have Been Avoided?
It’s hard to tell whether the demise of Grocon begins and ends with scion Daniel, or if it is simply the result of a single event setting off a chain reaction.
From the minute he stepped in as chief executive, Daniel Grollo had a clear vision for the way the construction company should be run. Taking a tough stance on unions where his father had previously maintained friendly relations and corporatising the business under an external board were two notable moves he made from the beginning.
But as time wore on, and a web of intercompany loans left unpaid, it became clear that Grocon – the construction company – was operating by chasing losses, and borrowing from other Grocon companies to make up for its shortfalls.
Just how intricate the web of Grocon companies owed money by the construction company is, we’re yet to find out. Could Grocon’s collapse have been avoided? Perhaps, with better financial management.
Where to Next for Grocon?
ABC News reported last month Grollo claimed in a call with creditors that the company had “wanted to move away from construction during the last few years, [but have] found ourselves closing it down in a most undignified way.”
At the second meeting for Grocon creditors, held on New Year’s Eve, it was revealed intercompany debts amounted to $81 million, with creditors claims in excess of $22 million topping out existing debts owed by the 39 Grocon entities in administration.
The most obvious way forward for Grocon is to close its construction company and focus on its more lucrative business ventures: development and property management.
Administrators KordaMentha will likely present three options to creditors: hand Grocon back to directors, liquidate the company and carve up assets, or draw up a deed of company agreement, to benefit Grocon and those with outstanding debts.
Grollo is holding out hope that he will be able to repay creditors with proceeds from his case against INSW.
Related News: Probuild Acquires High-Profile Grocon Projects
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