Selling Currawong: An Unhappy Union?

A short history of the financial dealings of the Eco Villages and Unions NSW

In 2006, John Robertson, Secretary of Unions NSW, made a call for expressions of interest in the sale of Currawaong.

On 13 February 2007 an agreement was reached between Unions NSW and Eco Villages P/L for the sale of Currawong Beach Cottages. The agreed price was $15 million. A deposit of $1 million was made by Eco Villages. The Contract took the form of “Put and Call” options.

(For those who nodded off during Wall Street or the GFC, the “call” leaves the conclusion of the purchase somewhat open ended for the buyer, and the “put” allows the seller to insist on the sale at the originally negotiated price).

The $1 million deposit was the security for the Option. The agreement was that Eco Villages had until 21 November 2007 to exercise the “call”. If no call was made by then, then Unions NSW had until  4 December to exercise the “put”. If neither happened, Unions NSW would return the security deposit.

(While the Put and Call option is in general use in financial markets, it is used less frequently in relatively smaller property negotiations. The major advantage to property investors is a possible decrease in title and stamp duties from the nature of the transaction. However, I am not suggesting that such a consideration was in any way a factor in the negotiations here.)

On  21 November , the last day when Eco Villages could exercise its “call” option, a variation to the Option was agreed upon. It extended Eco Villages’ “call” option to 20 May 2008 and Unions NSW’s “put” option to 2 June 2008. The contract was to be completed by 20 June. Eco Village paid another $500 000 towards the security deposit, leaving it at $1.5 million. There appears to be no public record of any further extensions between the parties

However, it later becomes apparent that these “put and call” options were continually used to extend the period for completing the transaction. Certainly the options were still in place when Eco Village’s $34 million development proposal was rejected in April 2009 by the then Planning Minister, Kristina Keneally.

In the absence of any other explanation for a $1.5 million “settlement sum” paid to Unions NSW in November 2009, it seems reasonable to assume that this consisted of the security deposit for the options. If this was the case, then there was no security backing any further use of the options.

At this stage, in late 2009, with no sale concluded, it seemed that Unions NSW was left with a handful of options:

  • Wait for Eco Villages to pay the balance ($9.5 million) of the agreed purchase amount, which on the evidence of over 30 years of other efforts, was not going to be realised by developing Currawong;
  • Wait for Eco Villages to give up its efforts and hand back Currawong to Union NSW who would retain the $1.5mn, but leave it with the continuing burden that it had sought to jettison. Even across this period it was losing around $50 000 a year;
  • Examine options for a “handover sale” to the Government to integrate Currawong with the surrounding state park.

While a “handover” would have been welcomed by practically every stakeholder, the appearance of the State Government handing over the likes of $10 million to Unions NSW around this time would have been absolutely explosive. While the Government’s prospects were absolutely dire, this plan would have sent it to absolutely new depths, with guaranteed referrals to ICAC and the Audit Office.

And waiting till after the election might have secured a neater “handover sale” from the new Government, but there was every incentive for the Government to drive a hard bargain knowing the desperation of Unions NSW to get out of Currawong.

Meanwhile Eco Villages takes one last throw of the dice in September 2010 and puts forward the $14 million proposal. By December, it tries its hand at getting a deemed refusal.

In January this year, it paid Union NSW the $9.5 million balance of the sale price, just shy of three years since the announcement of the sale. Six weeks later, and nine days before the election, Warwick Watkins concludes a deal to buy Currawong from Eco Villages for $12.2 million.

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