This article is from the Australian Property Journal archive
ONE-TIME media darling Michael Gu’s alleged extravagant handling of iProsperity investor funds has smashed ASX-listed, sole-asset fund Agricultural Land Trust, which has been forced writedown $132.8 million.
The fund was the first appoint external administrators the an iProsperity company, in April due to a default under its loan agreement. Voluntary administrators were appointed to the real estate advisory firm and former property media darling in July, with debts of $60.5 million.
Gu fled the country in July, while Nine Media report detailed accusations he used investor funds to buy a Lamborghini while running a $60 million Ponzi scheme.
A KPMG report said the main reasons for iProsperity’s collapse were the “potential misuse of investor funds” and “potential improper conduct”, and believes the company had been insolvent since incorporation in July 2019. It also suggested a further $120 million could be lost by investors.
iProsperity regularly made headlines with notable transactions including for the $300 million acquisition of a 23-hotel portfolio from AccorInvest last year, and the purchase of the five-star Pullman on the Park in East Melbourne for $200 million. In 2016 it teamed up with China’s Bridge Capital to purchase 333 Kent St in Sydney for a lucky superstitious price of $88,888,888.
In March, iProsperity launched into the United States, teaming up with Singapore’s Soilbuild Group to acquire Kimpton Hotels’ portfolio of seven boutique properties for US$477 million, in what was the largest US hotel portfolio sale in more than a year.
AGJ yesterday posted a full year net loss of $127.227 million, compared to its $13.743 million profit the year before. Total revenue fell 17.4% to $15.836 million. It reported an 11% increase in the value of its Linkletter’s Place asset, near Esperance in Western Australia, to $39.6 million in its full year results.
The fund’s responsible entity, One Managed Investment Funds Limited, said that based on the information provided by iProsperity’s receiver, David Levi and its voluntary administrator, now liquidator, Cor Cordis, it “believes it is very unlikely that the fund will receive any further payments from IPU”.
“Therefore, OMIFL has determined to fully impair both the principal and interest due under the loans made by the Fund to IPU.”
The amount of the impairment is $132,801,000.
While these the loans have been fully impaired, accounting standards do not allow the amount owed by the Fund under the limited recourse debentures issued to the Cornerstone Bond Fund and the Cornerstone New SIV Bond Fund to be written off, and the Fund is required to report a significant net asset deficiency.
“The relevant debentures were issued on limited recourse terms, meaning the debenture holders are only entitled to recover from the Fund, what the Fund recovers from IPU. The net asset deficiency caused by the impairment of the IPU loan receivables is therefore not expected to have a material impact on the performance of the Fund’s other investments.”
AGJ’s revenue from the sale of timber increased from $0.9 million to $1.5 million, despite a pause on harvesting activities at Linkletter’s Place. It has also secured an extension of its core debt by a further two years, and secured a two year unsecured facility to assist with paying interest while harvesting is paused.
