This article is from the Australian Property Journal archive
GRANT Thornton, the administrator of Ralan Group, has delivered a scathing report into the failed property developer, finding elements of a Ponzi scheme and said the group has been insolvent for more than five years and owe creditors $564 million.
In a report to the corporate regulator ASIC, Grant Thornton found there was evidence of numerous breaches of the Corporations Act.
The report said Ralan never recovered financially from their primarily builder going bust in 2014 and the group has been insolvent from at least June 2014, including a claim for insolvent trading against the group’s boss and founder British William O’Dwyer would be for circa $248 million.
Said Jahani, national managing partner – financial advisory, said at this stage, it is difficult to say how much money will be recovered for creditors.
“At the moment we estimate between nil to 2 cents in the dollar. Whilst Ralan may have claims significantly in excess of this – for example we believe there is a claim for $248 million against the director for insolvent trading, we do not believe he has the financial capacity to meet such a claim. In addition, there is also c. $238 million owing to several secured creditors. When combined with employee and trade creditors, total debts owed by Ralan at the time of its collapse were c. $564 million.”
Jahani said due to the extent and duration of the alleged financial misconduct within The Ralan Group, the nature of their funding model,
“coupled with what we have determined to be a deliberate effort to conceal the extent of debts owed to purchasers who had released their deposits from Ralan’s financiers by altering the group’s records for the benefit of William O’Dwyer and his related parties…
“There may be very little left for creditors.” Jahani warned.
“Our in-depth investigation has found that The Ralan Group was trading insolvent from at least February 2014 when its primary builder, Steve Nolan Construction entered into Voluntary Administration and it relied on released purchaser deposit monies to bail itself out of the financial hole. It never recovered from this event. At no time from 2014 onwards was The Ralan Group in a position to pay all creditors in full,” he added.
From 2008 to 2012 the majority of the group’s developments were profitable with an average profit across 19 builds of circa $827k per development after payment of interest in respect of released deposits.
Grant Thornton also criticised of the company’s business model and found there were elements of a Ponzi scheme.
“An unsustainable business model which was critically under-capitalised with limited equity that replicated a partial Ponzi scheme;
“Unprofitable developments leading to losses being funded by released deposits;
“The collapse of two builders used by the group to build multiple developments – Steve Nolan Construction and SX Projects which led to significant additional costs having to be borne by the group;
“Poor management and direction of the group as a whole and in particular certain business units,”
A process is ongoing with several assets either on the market or may have exchanged but not yet settled, including:
- the Paradise Resort Hotel (land and motel) – this was the future site of Ruby Towers 2, 3 and 4. It has been sold by the receiver for Balmain (secured creditor) for $43 million.
- Budds Beach – this was the future site for the Sapphire development – this is currently on the market via Knight Frank under instructions from the receiver for Wingate (secured creditor).
- Ralan Arncliffe – this is a partially completed residential and commercial development. The receiver for Wingate is currently in the process of completing this development.
