ASIC has urged investors to exercise caution as the repercussions of two real estate investment schemes, including one based in the Bendigo suburb of Bagshot, linger.
The Federal Court this month made orders to wind up five companies in relation to their involvement in two land banking schemes: Hermitage Bendigo, and Veneziane.
About 700 investors bought into the scheme based in Bendigo, raising about $24 million.
The court was told Project Management (Aust) Pty Ltd, one of the five companies subject to this month’s order, entered into project management agreements with four other companies and exercised control over their finances.
Those project companies – Brookfield Riverside Pty Ltd; Bilkurra West Pty Ltd; Bilkurra South Pty Ltd; and Gillies Road Pty Ltd – entered into contracts for the purchase of land for rezoning.
They were also involved in promoting the schemes, and received money from investors.
In a statement, ASIC said it sought the orders because it was concerned the four project companies were insolvent and that more than $15 million raised from investors had been transferred between companies, ‘without any apparent concern for obligations owed to investors’.
ASIC was also concerned the majority of funds raised from investors ‘had been dissipated’.
Justice Mark Kranz Moshinsky found the four project companies were insolvent and deemed it just and equitable they be wound up.
His honour also found it ‘just and equitable’ that PMA be wound up, which the company consented to.
“The court found that its financial affairs were inextricably bound up with those of the project companies; that PMA had control over investor monies; it had intermingled funds and used them across the various land banking schemes; it had maintained poor documentation; and it took management fees out of the investor funds released to it,” ASIC wrote in a statement.
The court also ordered that Nicholas Martin and Andrew Thomas Sallway, of Melbourne-based BDO Australia, be appointed liquidators of PMA and the four project companies.
ASIC is conducting broader investigations into land banking schemes.
Commissioner John Price said ASIC would take action against entities that ran schemes were investor monies were put at risk.
“Investors should be very careful in ensuring they understand the risks associated with land banking schemes and should ensure they obtain independent legal and financial advice before making any such investments,” he said.