This article is from the Australian Property Journal archive
THE billion Pacific First Mortgage Fund, formerly run by City Pacific, has shed half its weight through bad loans written to City Pacific related companies.
Investment fund manager Balmain Trilogy which took over management of the fund recently has just completed a review in conjunction with auditors KPMG.
The review reveals gross assets write down of $448.9 million for the 12 months to June 30. This write down represents an additional impairment of $108.9 million from the written down value as at December 2008 which was $630.0 million.
The fund which previously had over $1 billion in gross assets now stands at $521.1 million.
Based on these revised accounts, the net tangible assets stand at $0.48 a unit. The NTA takes into account the $91 million owed to the Commonwealth Bank of Australia as at June 2009. Since then and following some asset sales the fund has been able to repay further $8.7 million on August 2009 to reduce the outstanding loan to $82.3 million.
Balmain Trilogy’s joint CEO Rodger Bacon and Andrew Griffin said whilst the additional write-down was inevitable and extremely disappointing for unitholders, they were particularly disappointed that City Pacific related companies had a lion share of the bad loans.
Bacon said the write-down highlights the woeful performance of City Pacific which was responsible entity of the fund for that entire period.
“More disappointingly the biggest part of this write-down is attributable to loans to related parties of City Pacific,” he added.
Griffin said the strong property and debt markets that preceded the Global Financial Crisis did much to hide the damage that was already being inflicted on the fund by City Pacific.
“The honeymoon ended abruptly when the markets turned and it is only now that we can see the extent of the harm that City Pacific caused,” Griffin continued.
But there is light at the end of the tunnel.
Griffin believes that with the removal of the previous conflicts and significantly greater management resources.
The worst for unitholders is over, he declared.
“Although we are mindful that some investors might support an acceleration of sales, notwithstanding the significant discounts that would result, it is critical that some of the fund’s resources are allocated to improving existing assets.
“This will ensure that these assets achieve an improved return for the PFMF and consequently the value of the Fund is at least maintained and potentially enhanced,” he added.
As part of its commitment to ensure that unitholders are closely informed as to the management of Fund, Balmain Trilogy are in the process of bedding down the Investor Committee. More than 300 unitholders have expressed interest in being on the 10-person Committee (including an independent chairman), with the auditors expected to announce the successful candidates by early December so the first meeting can be held before Christmas.
Australian Property Journal
