The Australian Securities and Investments Commission (Asic) has requested the Federal Court in Melbourne grant a wind-up order against a land banking scheme known as Realestate Equity Investment Trust (Reit) and an associated company, Timeline Project Management.
The Reit scheme owns land in the Australian state of Victoria that was intended to be rezoned and developed. However, Asic believes that the scheme is unviable given that there has been no progress in developing the real estate investments of the fund since the initial fundraising.
If the regulator’s bid is successful, liquidators will be appointed to Reit and Timeline.
No reasonable prospect
A third company, Lotus, was the responsible entity that managed the Reit scheme until September 2016 when its Australian services licence was cancelled by Asic for various compliance breaches; including failing to lodge financial statements for itself and Reit.
Lotus went into liquidation in December 2016.
As a result, Asic alleges that the company is operating as a managed investment scheme without an obligatory responsible entity and has no reasonable prospect of finding one.
Since June 2013, investors have been making payments into a bank account in the name of Timeline, but it is not and has never been the responsible entity of Reit.
Investor rights
Asic advised that it is not seeking compensation or refunds for investors. However, if the wind-up order is approved, there may be a return to creditors as part of the liquidation process.
The regulator said that any distribution to investors will be undertaken by the liquidators appointed by the court.
LMIM
Property and land investments in Australia have been under the regulatory microscope since the collapse of LM Investment Management.
LMIM, which entered voluntary administration in March 2013, ran a collection of funds that invested in the Australian property market; either by buying property and land for development directly or by providing mortgages to developers.
According to Asic, LMIM was the responsible entity for seven registered managed investment schemes.
It was also the trustee for the LM Managed Performance Fund (MPF), an unregistered managed investment scheme with about 4,500 investors in which more than $400m was invested.
In total, LMIM was responsible for managing at least $800m on behalf of approximately 12,000 investors in Australia and overseas.
Investor action groups were created following LMIM’s collapse that demanded investigations into LMIM and sought to recoup their investments.
To-date, the single largest recovery has been A$40m from a retirement village funded by the LM First Mortgage Income Fund.
