Melbourne City Mission is facing a $750,000 loss after a wealthy property developer allegedly backed out of a deal to help pay for the charity's new headquarters.


The dispute comes on the heels of a major cost blow-out on the project, with the community outreach group budgeting $1.65 million, but spending $3.5 million on the South Melbourne property.


The Sunday Age believes front-line services have not yet been affected by the unpaid debt or unanticipated construction costs. The 160-year-old charitable group runs family crisis centres, disability programs and homeless support services.


MCM agreed to lease the building on Kings Way for 15 years on the condition that owners Siamidis Properties and United CKS contribute up to $750,000 for its refurbishment, according to court documents. The ageing, three-storey property was renovated, with the owners agreeing to pay for cleaning, painting, regulatory works and asbestos removal.