Syndicate wind-up plan opposed

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Investors in one of SPI Capital’s property syndicates are being called on to vote against winding it up until a $1.1m unauthorised loan – and the bill for the manager’s apology – has been repaid.

Thursday, August 23rd 2012, 7:00AM 6 Comments

by Niko Kloeten

SPI recently sent a letter to investors in its Gloucester syndicate advising them of its plan to terminate the scheme, which will be put to the vote at a special meeting next week.

The move to close down the syndicate comes after an insurance pay-out of $40.6 million was finalised for the syndicate’s earthquake-damaged building in the Christchurch CBD, which is to be demolished. 

The syndicate has 215 units issued at a unit contribution of $25,000; the wind-up plan will see investors get $27,000 each from the proceeds of the insurance settlement.

“The Gloucester Syndicate has provided a cash paid return to investors from inception of $14,790 (an average of 10.3% pa) up until the time of the earthquake… total cash returned to investors will be $41,790,” the letter said.

“Further to this there is more to come following the realisation of the SPI Assets advance [the $1.1 million related-party loan] and the land.” 

However, not everyone is happy with the proposal.  Accountants Cliff Jones, Robert Gale and Bill Cooney, who are all invested in the syndicate, have sent a letter to other investors urging them to vote against the plan as it stands.

They will be putting forward resolutions that would require SPI directors Murray Alcock and Allister Knight to repay the $1.1 million loan, which was funded by increasing the size of the mortgage without the knowledge of Gloucester’s investors.

They are also pushing for any fees owing to the manager to be offset against the outstanding loan advances, and for the manager to “repay the $36,846 they charged the syndicate to apologise to investors for Alcock and Knight acting outside of their legal authority.”

The proposed $27,000 pay-out should be $10,000 higher, they said.

“In addition to the $5,000 not being paid because of the $1.1M taken by Alcock and Knight investors would have received an extra $5,460 if SPI had done their job and ensured Loss of Rents insurance was in place for the Syndicate.

“So the first pay-out would have been over $37,000 not $27,000 SPI saying is a job well done.”

Jones told Good Returns the outcome for investors in the syndicate could have been much worse had it not been for the earthquake and subsequent insurance pay-out.

“It looks like investors will get their money back because the insurance paid out on replacement value which was higher than the market value of the building.”

Alcock said he was aware of the letter by Jones, Gale and Cooney but wasn’t aware of its contents.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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