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Sad to see all those small investors lose their hardearned money.
http://www.theage.com.au/news/natio...t-up-in-the-air/2007/05/29/1180205250376.html



Millions at stake as towers left up in the air

Ben Schneiders and Helen Westerman
May 30, 2007

TWO unfinished apartment towers in Melbourne are in limbo after the $300 million collapse of a Sydney-based financier and property group.

Estate Property Group and its finance arm, Australian Capital Reserve, collapsed late on Monday amid concerns the value of its projects across Australia were overstated. As many as 8600 small investors could lose millions between them.

The two unfinished Melbourne projects are the 41-level neo200 on Spencer Street and the 14-level Grosvenor on Queens in Albert Park.

On Monday night, McGrathNicol were appointed voluntary administrators of Estate Property Group as well as ACR and 24 other companies. A spokesman for McGrathNicol declined to comment on the fate of the company's projects.

Last night an Australian Securities and Investments Commission spokeswoman told The Age that ACR had been investigated for the "possible overstatement" of the value of its investment properties in its most recent prospectus.

Other areas of concern were the lack of information about the valuation of its projects as well as inadequate disclosure in a number of areas, including construction risk.

The spokeswoman declined to say which projects were involved.

Late last month, ASIC placed a final stop order on ACR, which prevented it from raising funds. ASIC did not disclose its reasons at the time.

ACR relied on raising funds from the public that it then lent out to Estate Property Group to fund development activities. In its latest offer it was promising investors a return of between 8.75 per cent and 9.55 per cent. But a copy of ACR's most recently lodged financial accounts show it was fast running out of cash. Between the end of 2005 and the end of 2006, its cash dropped by more than $33 million to $8.7 million.

Most of Estate Property's projects are in NSW.
 

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skyscraper connoisseur
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what was that Sydney based developer which built apartments above the old Uniting Church near Wynyard station?
 

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I really fell sorry for these investors - one for their stupidity and two for their bad luck.

Unfortunately they have no idea what they are investing in.

They think they are investing in a traditional Fixed Interest Debentures with low risk (made harder by the fact that these companies advertise these misleading claims).

They would be horrified to know that they are lending money to a holding company who then on lends to developers (usually owned by the holding company) who cannot obtain 'cheaper' finance from the larger banks! Mezzanine Finance!!!!! If the banks are unwilling to lend to these companies obviously the risk is far too great for individual investors.

These products are not a substitute for low risk products such as real fixed interest, term deposits or other forms of credit.

The biggest problem is that investors believe they are receiving a great yield. However for the risk they are assuming this return is no where near adequate- they might as well go to the casino.

Westpoint, Fincorp and now Australian Capital Reserve.......who'll be next!
 

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ACR wasn't that firm that ad the TV ads with people paying for stuff with bricks was it?
 

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I really fell sorry for these investors - one for their stupidity and two for their bad luck.

Unfortunately they have no idea what they are investing in.

They think they are investing in a traditional Fixed Interest Debentures with low risk (made harder by the fact that these companies advertise these misleading claims).

They would be horrified to know that they are lending money to a holding company who then on lends to developers (usually owned by the holding company) who cannot obtain 'cheaper' finance from the larger banks! Mezzanine Finance!!!!! If the banks are unwilling to lend to these companies obviously the risk is far too great for individual investors.

These products are not a substitute for low risk products such as real fixed interest, term deposits or other forms of credit.

The biggest problem is that investors believe they are receiving a great yield. However for the risk they are assuming this return is no where near adequate- they might as well go to the casino.

Westpoint, Fincorp and now Australian Capital Reserve.......who'll be next!
So, Zach, can you explain (simply if possible) where the dough goes. Hundreds of investors 'invest' hundreds of millions of dollars in these companies. What is the money used for? Do they sell the apartments they build at a loss? Are the people running these companies crooks, inept, or both? Do they siphon money off into their Swiss Bank accounts? I'm mystified as to why these types of companies go broke and where the money ends up.
 

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Generally they spread it around on wages, approvals, admin? There projects can be badly thought out with minimal returns, i doubt to many have real assets of worth. It's different for every collapse. Westpoint was both Crooks, inept and Crooked by others.

As Zach said they have high risk structures that just spread the money around till it all gets spent. Westpoint pulled money from one Holding company to pay for one development once thats started the company continued to play with there money to cover there debt.
 

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Sydney: World's best city
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ACR wasn't that firm that ad the TV ads with people paying for stuff with bricks was it?
I remember two ads

1)The Elderly lady who gets excited when she gets the mail and sees a check from them and sits by the pool drinking orange juice and reading a book (2001-03).
2)Dancers in tux's and formal gowns dancing with money (2004-05)
 

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So, Zach, can you explain (simply if possible) where the dough goes. Hundreds of investors 'invest' hundreds of millions of dollars in these companies. What is the money used for? Do they sell the apartments they build at a loss? Are the people running these companies crooks, inept, or both? Do they siphon money off into their Swiss Bank accounts? I'm mystified as to why these types of companies go broke and where the money ends up.
Ill sum up the problem: Individual investors invest money into a holding company that subsequently pay them around 9%. Therefore to make money they have to on-lend this money to developers (who are related to the holding company) for at least 15% - meaning the projects are highly speculative and therefore risky. Any slight deviation in costs will result in big problems.

Fincorp went around buying undeveloped properties in outer Melbourne – with 99% of those properties returning no income until the properties were developed. However, add a property downturn + very slim margins meant the entire scheme blew up.

Most of these schemes involve one holding company purchasing undeveloped land for market prices and then on-selling these assets to another investment company (i.e. where these investors have lost their money) – while adding anywhere between 25% - 100% from the original price. Hence investors (1) indirectly investing in property that has been marked up for no apparent reason but to profit the founders of the company (2) investing in high risk speculative property investment.

If these projects were 'high quality' and the developers had real 'skills' then they could access money through large financial institutions at a far cheaper rate and not rely on unsophisticated investors.

http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/Debenture_Campaign_Report.pdf/$file/Debenture_Campaign_Report.pdf

Have a read of this report. ASIC has continuously warned investors about the risks involved in these investments yet individuals keep getting sucked in.
 

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ACR wasn't that firm that ad the TV ads with people paying for stuff with bricks was it?

That's Australian Senior Finance. They allow you to take loans off your house that you don't have to pay off until after you die.

ACR had the adds with the cricket players and the oversized cricket ball, as well as the bowls add with the bowler smashing all the other balls.

Crap adds.
 

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F*ck Finance is Boring.

What ever floats your boat I suppose.
 
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