By Carolyn Cummins Commercial Property Editor
A BATTLE is looming over the $560 million redevelopment of Darling Walk, the former home of Sega World, with the private developer Jacfun launching legal action against the Sydney Harbour Foreshore Authority for "deceptive conduct".
A summons for the action is listed for May 8 in the NSW Supreme Court and centres on whether Jacfun is entitled to a cut of the development profits in the project, as per its leasehold contract.
Jacfun has claimed that the authority started work on the project before its lease expired on June 30, 2008. It cited a deed that had been drafted as early as November 2007 by the law firm Clayton Utz between the authority and Lend Lease regarding the Darling Walk redevelopment.
In September last year Lend Lease and the Sydney Harbour Foreshore Authority formally announced the redevelopment of the area into a retail and commercial project with the Commonwealth Bank as the anchor tenant.
Lend Lease is not involved in any court action.
Jacfun had the leasehold over the area, next door to the Imax theatre at Darling Harbour, for 99 years, but agreed to sell that to the authority on June 30, 2008.
Michael Speck, Jacfun's commercial manager, said: "It's impossible to believe they organised a $560 million building in the two months after our contract ran out.
"It is difficult to accept that Lend Lease is anything other than an innocent beneficiary of the deception perpetrated on us. The deception by SHFA has continued for several years and by the middle of last year the focus became creating [a] smoke screen for those responsible. Unless someone takes action, what happened to us can happen to any Darling Harbour tenant."
The saga started in late 2000 when the Japanese tenant, Sega World, closed down, followed shortly after by the One World Sports restaurant and the Rainforest cafe.
According to public documents, in November 2001 the Sydney Harbour Foreshore Authority advised Jacfun that it would be appropriate if the two groups engaged in a joint venture proposal.
At that stage Jacfun said its leasehold was worth between $18.7 million and $23 million.
But in late 2002, the authority said that, given the site was not generating any cash as it had no tenants, the leasehold was worth closer to $10 million or even less.
A spokesman for the Sydney Harbour Foreshore Authority said the authority was unaware of any specific claims Jacfun had made regarding Darling Walk.
"The Foreshore Authority can confirm, however, that Jacfun agreed to a negotiated acquisition of their lease in early 2003, ending their involvement at the site," the spokesman said.