Syndicate gloom grows
THE BAD news keeps piling up for investors in SPI Capital’s disastrous property syndicates.
The latest instalment of gloom was a letter to investors in SPI’s Gloucester Syndicate which was sent out on December 19, just in time to dampen their Christmas festivities.
The Gloucester Syndicate owned the former Farmers department store building in central Christchurch, which suffered severe earthquake damage and has since been demolished.
The letter was sent out by Taurus Group, a Christchurch accountancy firm which is starting to take over the management of several of SPI Capital’s syndicates and sort out the mess they are in.
The letter began by outlining the negotiations for the sale to the Government of the land on which the building had stood.
The site had been earmarked for compulsory acquisition and redevelopment. The Government valued the land at $1500 a square metre compared with the syndicate’s valuation of $2000 a square metre. They eventually agreed on a sale price of $1820 a square metre, to give a gross sale price of $2.99 million.
The building was fully insured but there remains considerable doubt about how much money investors will ultimately receive from the insurance payout and sale of the land because of the way SPI managed the syndicate’s finances.
The Gloucester Syndicate is understood to be owed around $1 million on a loan it made to SPI Assets, a company associated with SPI Capital’s directors Murray Alcock and Allister Knight.
SPI Assets used the money to part fund the purchase of two
The chances of Gloucestor’s investors receiving any money from the sale appear less than slim.
office buildings, one in Auckland and one in Hamilton, which Alcock and Knight intended to use as the core of a listed property fund they were hoping to float.
But the plan never proceeded and, according to Taurus, the Hamilton building was sold by its first mortgagee at a loss, meaning the Gloucester Syndicate received nothing from the sale.
Any hopes of Gloucester recovering any of the money it loaned SPI Assets now depends on the outcome of the pending sale of the Auckland property, which houses the District Court at Henderson.
However, the chances of Gloucestor’s investors receiving any money from the sale appear less than slim.
The Taurus letter said the property was valued at $8m-$9m and the first mortgagee Heartland (formerly Marac) was owed about $8.7m.
‘‘It is unlikely there will be any proceeds available from this source to repay the Gloucester Syndicate,’’ the Taurus letter said.
‘‘Information we have received regarding the financial position of SPI Assets shows the company is insolvent with a likely significant shortfall.
‘‘We have been advised by the directors of SPI that since our last communication, a private holiday home has been sold and a private residence is in the process of being sold. The proceeds have been applied to reducing personal debt.
‘‘We are happy to investigate SPI Assets further but are conscious of spending time and money on a possible futile exercise,’’ the letter concluded.
Gloucester is just one of several property syndicates which were set up and managed by SPI Capital, which are now facing significant financial difficulties.