Auditor rings alarm bells over property fund
The audit report of a property syndicate that raised $1.8 million from investors in a failed capital raising records the auditor’s belief there were statutory breaches and signalled losses are likely.
The SPI Property Fund, directed by Murray Alcock and Allister Knight, registered a prospectus in September 2007 seeking to raise up to $75 million to buy – among other property – the Waitakere District Court building in Henderson and the Modena Building in Hamilton.
The offer raised only $1.9m, well short of the required minimum subscription of $4.75m specified in the prospectus.
The Auckland-based auditor, William Buck Christmas Gouwland has released a report for the year ended March 13, 2013 – prepared on July 1, 2014 – in which the auditor expressed the view that the company didn’t comply with certain legal obligations and that it was no longer a going concern.
The auditor said aspects of the Securities Act, the Companies Act and the Financial Reporting Act had not been complied with, specifically identifying failures to provide regular reports and not keeping investor funds garnered from the failed capital raising in trust to ensure they could be refunded.
‘‘The company held funds on behalf of investors totalling $894,786 from subscriptions received relating to a prospectus issued in 2008. The board has failed to comply with S36A of the Securities Act 1978 to hold these funds in trust until they were returned to investors,’’ the auditor said in its report.
The auditor also noted related party loans made by the company had now been fully impaired and investors were likely to suffer losses as it was no longer a going concern.
‘‘There are insufficient resources in the company to enable the full repayment of these funds and the accrued interest,’’ the auditor said.
Earlier this month the Financial Markets Authority announced it had charged Alcock and Knight each with four charges under the Financial Reporting Act over the late filing of accounts for SPI Property Fund and its manager, Alcock and Knight-directed SPI Capital.
Alcock and Knight have yet to plead, and their next court appearance is scheduled for Wednesday.
The Sunday Star-Times reported in 2012 the FMA was investigating the wider SPI group.
A spokeswoman for the market regulator said this investigation was ongoing and would not comment when asked whether it was interested in the matters raised in the auditor’s report.
Murray and Alcock’s broader SPI group began promoting property syndicates to mum-anddad investors in 2003 and completed nine syndications which, at their peak, had a combined value of $70m.
Only six of the original syndicates are still operating.
Questions sent to Alcock and Murray about the auditor’s reports were responded to with a statement that said: ‘‘The FMA requested retrospective audited accounts. We did not consider that these were required but have nevertheless complied with the FMA’s request. The SPI Property Fund’s focus is on realising its
assets and repatriating capital, and it is in regular contact with its investors.’’
Accounts for SPI Property Fund for the years 2011-2013 show investors had been repaid $905,214 of their initial capital, but the auditor’s report records that after repayments, there were insufficient funds to repay certain sums, including accrued interest, totalling $1.479 million. The company is recorded as having assets totalling only $5280 as at March 31, 2013.
The accounts show some funds raised from investors during the failed capital raising were advanced to Treble Investments, a company controlled and owned by Alcock and Knight.
The accounts record advances of $729,500 to Treble to pay nonrefundable deposits to purchase the Waitakere District Court and Modena Buildings.
These advances were converted to unsecured, capitalising, advances but by 2013 had been totally written-off.