Court orders winding up of Melbourne fund manager PE Capital
The Federal Court has ordered the liquidation off Melbourne-based fund manager PE Capital, which collapsed last year after raising over $16 million from private investors through a series of registered and unregistered managing investment schemes.
At its height, PE Capital claimed a $650 million pipeline of projects, including a 200-room Hyatt Hotel in the city’s south-eastern suburbs that did not proceed.
Following proceeding lodged in May last year by the Australian Securities and Investments Commission, the Federal Court found that PE Capital breached the law by operating managed investment schemes without an Australian Financial Services licence and engaged in misleading and deceptive conduct.
“I am satisfied that it is in the public interest to wind up PE Capital Funds Management for the purpose of protecting investors and potential investors,” Justice Cheeseman said.
“Winding up PE Capital Funds Management will also serve to condemn the past breaches of the [Corporations] Act by PE Capital Funds Management.”
Justice Cheeseman ordered the winding up of three registered managed investment schemes including the PE Capital Master Fund and the PE Capital Monthly Yield Fund as well as four unregistered schemes, these being the PE Capital Asia Wholesale Opportunities Fund, the PE Capital Asia Wholesale Diversified Income Fund, the PE Capital Property Development Opportunities Fund and the PE Capital Property Development Opportunities Fund.
PE Capital raised more than $16 million from local families for these funds which according to court documents were set up for the purposes of “acquiring and developing vacant land on the outskirts of Melbourne and Geelong for the potential future operation of various businesses on the land, such as service stations, convenience stores, fast food outlets and childcare centres”.
Investors were promised returns of 8-9 per cent year on funds invested in early 2018 but never received a dollar, one website set up by investors after PE Capital collapsed, claims.
Among PE Capital’s projects was a $50 million Hyatt Hotel to be developed as part of a mixed-use complex at 1690 Centre Road in Springvale. The project was later shelved and the 5186 square metre property sold on behalf of mortgagee Manda Capital for about $7 million in 2020.
Other projects promoted by PE Capital include a mixed-use development incorporating a 30-lot subdivision in Bell Park, Geelong, and a number of sites acquired for service station-anchored projects in Melbourne’s outer suburbs.
PE Capital’s completed projects included a 7-Eleven service station and fast food complex in Cranbourne, which sold for a combined $13 million in 2018 and 2019.
A statutory report filed by PE Capital liquidator Neil Cribb from RSM Australia, said 33 unsecured creditors were owed $18.56 million.
“Preliminary investigations indicate the company [PE Capital] was likely insolvent from at least 30 June 2019,” wrote Mr Cribb in his report.
Mr Cribb said PE Capital acted as a holding company for several special purpose vehicle companies which raised funds from investors to develop mixed use commercial properties. PE Capital in turn received management fees from the SPVs for project management services.
The SPVs borrowed money from PE Capital for “what appear to be working capital purposes” and “loaned monies to unrelated parties for unknown purposes”, Mr Cribb wrote.
“My preliminary inquiries indicate the monies owed by the SPVs are unlikely to be recoverable as the SPVs are financially incapable of repaying the debts as the projects undertaken by the SPVs are currently incomplete (and will not be completed withoutsignificant external funding) or had not generate sufficient income to repay the debts owed.”
PE Capital was led by CEO Simon Day, a former partner at Deloitte Corporate Finance and principal of boutique advisory firm Canterbury Hill.
Its funds management activities were headed by Sam Osbourne, whose family has interests in property development, while Martyn Barnes, managing director of Dubai-based Barnes Capital, was chairman of PE Capital.
