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LM Investment Management - Lack of confidence

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Re: LMMPF - Up & Away (Again)?


Yes in deed. Thanks ASICK for your reply...actually by starting a new post - we'd miss your insightful commentary!
I wasn't able to attach the 8th update yesterday so here it is.http://www.kordamentha.com/docs/au_109_lm/130605-u-eighth-update-to-investors-crs-jv-(final).pdf?sfvrsn=2
 
Pre-Existing Investors ALWAYS Last in Line


oh.. you won't be so lucky as to get to miss me .. but thanks anyway.

I really only got involved to warn about Trilogy - and it was only after realizing that many posters were 'way back there' where we used to be that I decided to post somewhat profusely.

We now find that Trilogy, instead of returning money to investors has gone ahead and bought more land at Martha Cove, and this is after stating (in 2010) that any cash would be returned immediately to investors.- see http://www.moneymagik.com/

Thanks for posting the update - you'll all note that KordaMentha can't help itself other than to attempt to carry on the scheme as manager in order to rake in all those millions in fees.

It's the nature of managers to see all these schemes continue on, sometimes at all costs, because they've got no 'skin in the game' (so to speak) - managers are winners, even if investors are losers, and in many cases, if they're able to engage with a relative to make more $$$$, then they're able to.

KordaMentha's proposed scheme necessarily retains investors LAST in line, regardless of whether investors get to put in extra $$$ into a more protected class of unit, which most probably will rank BEHIND the JV partner. The whole scheme will be suspended on the back of the pre-existing investors.

KordaMentha is really proposing a whole new investment - there doesn't seem to an offer to let investors out, it seems to me to be more about keeping them in.
 
I think there is great value in keeping the LM discussion - whether on MPF or on the FMIF and its feeder funds - all on this one thread. By staying on this same thread not only do we all benefit from ASICK's wisdom but there are simply too many common issues straddling all funds which might get missed if the discussion was split into two.

I also attach FTI's circular released today on the status of FMIF.

The FMIF investor meeting is now to be held on 13th June - to vote on FTI or Trilogy (even though seemingly Trilogy now say they don't wish to be the RE so one wonders at the purpose of the meeting .. !) or, preferably, to vote on neither of them ..

View attachment FTI-FMIF-report-07-06-13.pdf
 

I also believe in keeping this thread going as is. The doc that Taja has JUST attached should be read by ALL LM investors not just in the FMIF but ALL its feeder funds including the WFMIF where good old Trilogy is the RE
 

Thanks for posting the attachment Taja - there documents are not always identified on LM's site by readers.

I should point out, it's not my wisdom I try to impart, it's my experience - it's a matter of having 'been there, done that'. I know it's difficult because members are subject to the 'tyranny of the (ill-informed) majority' just as voters are in any democracy-like structure.

FTI uses all the right words, but investors should focus on the limiting features of statements, the disclaimers. For example:

"2.8 Distribution of Capital to Investors - We are cognisant of the desire for investors to receive regular capital distributions as the FMIF is wound down. To this end, we are expecting that after the June capital distribution is processed there will be a further distribution in early August and thereafter, capital is expected to be distributed to investors on a quarterly basis, subject to cash flows, as the wind down progresses."

The whole spruik is subject to two words, "cash flows", and so, everything else is irrelevant. Actually, it's subject to surplus monies and the bank's consent.

I'd sum up the whole document as ... a spruik, except that LM says that they're not going to engage in long term situations.

I'm stunned that so much can be spruiked about so little. I guess it's all designed to make punters feel 'warm and fuzzy'.

Crikey, they're going to pay the outstanding income distributions from the fund with such capital losses?

Wow! The "quick wins" should have got punters' ears up and tuned in - I haven't heard this sort of terminology since I last put a few bucks into a pokie.

"However, following further analysis and review overseen by the Administrators, it was identified that that there are a number of assets where the provisioned loan values (i.e. the current FMIF book values) are still higher than a reasonable assessment of current valuation would suggest and further asset write-downs can be expected."

Crikey, what a surprise - only a "number of assets", when ALL loans were at 100% LVR !!!!

Remember, LM (FTI as administrator) is raking in a management fee based on FUM (funds under management).

This is really good (if they stick to it), "In potentially progressing with development options, we are also very conscious of time – we are not looking to engage in outcomes that will take many years to conclude as this introduces:
• Longer timeframes increases the potential for uncontrollable / unforseen risk elements (e.g. potential for commodity prices, currency instability, overseas government debt issues or the like) impacting on the domestic economy;
• Delays the return of capital to investors; and
• Unnecessary increases in the costs incurred through continued charging of management fees to the fund as long term projects are worked through."

That's a good point.

Trilogy/BT told a PFMF investor just recently that the fund's asset at Broadbeach (Grande Pacific) where nothing was sold for about three and a half years (except for one sold by Citypac and settled by Trilogy) will take two or more years more to resolve - millions in fees - no doubt about it, a frozen fund is a manager's delight.

BT said back in 2009 that Grande Pacific was a 'business as well as real estate' - certainly has been a good business for Trilogy (and BT) for all the fees over these past years will be for the years to come. Don't forget there's a receiver down there too --- $$$$$$ for all, but not for investors.

"Balmain Trilogy joint chief executive Andrew Griffin described the completed Broadwater tower as 'a business as well as real estate'. He said receivers were called to ensure the business was 'managed properly' and to maintain the continuity of rights for existing occupants.

"It is a considerably valuable business asset (that) has been devoid of management," he said. He said a fire sale of the property was not on and Balmain Trilogy would hold the property for the long-term benefit of First Mortgage Fund unit holders.""

http://www.goldcoast.com.au/article/2009/10/05/143895_gold-coast-business.html

What Trilogy told investors about Grande Pacific : http://moneymagik.com/grande_what.php

Here's some spruiks from Trilogy: http://moneymagik.com/yardy_yardy_yah.php
 
Re: LM Investment Management - MPF

Hi Guys,

It is interesting to read all the stuff. I'm one investors in MPF .And I would like to have your opinion ( ASICK) about KM proposal to add extra cash into this fund in order to ensure ME development. I'm really surprised that KM came back with this proposal and why they are not pressing Peter Drake to return his personal loan?? It will cover Suncorp loan in full...
 
LMMPF - The New Deal


Hi Vibe, I just have some experience as an investor in what was the City Pacific First Mortgage Fund, since July 2009, the Trilogy Pacific First Mortgage Fund. I hold a degree in law, but I don't practice law (I don't hold a practicing certificate) - so while I'm able to give an opinion (as a member of this forum), it's not anything you're able to rely on - I also point to the forum's disclaimer.

I really haven't looked at the document in depth, but it seems to me that KM intends to proceed along with either Option C or D. The only difference I see between the two options ("C" and "D") is the share holding of "NewCo".

For "Option C", the priority units would hold PART of the total shares on issue in NewCo, with the remaining shares held by an equity partner.

For "Option D", the priority units would hold ALL of the shares on issue in NewCo.

I don't see there's a difference, because no matter what happens, whether it's an equity partner holding shares along with pre-existing unitholders (as priority unitholders after dipping in more $$$$$), or whether it's a pre-existing unitholders (as priority unitholders after dipping in more $$$$) along with an equity partner (as a single entity) taking up most or part of the priority unit issues or other new punters taking up most or part of the issue, the result for pre-existing members (as priority unitholders) is exactly the same.

Perhaps, if anything an external equity partner might want to strike a better deal to enter the fray.

I think these sorts of mechanisms are held out to investors to make them feel part of the deal - but sadly, only those new investors will stand to hold decent security (ahead of pre-existing members), but after the facility provider to NewCo - remember, pre-existing members are at the bottom of the rung, no matter how it's presented.

Investors in NewCo will want (1) security ahead of pre-existing fund members, and (2) a decent return (yes, real money and at an attractive rate). This means that NewCo (as far as pre-existing members go) is just a massive debt mechanism set up to exploit Maddison, from which exploitation pre-existing LMMPF members seek a return [it's really a new investment - a new deal].

Further, there's the issue of price - how much would Maddison be sold for? After all, the money from the sale would be fed back to the fund as part payment of the $250m debt. I guess most of that money would then be distributed to LMMPF unitholders as a capital distribution - investors would want to make sure that the sale price is one which they're prepared to accept. One media spruik said Maddison was worth about $30m - so, why shouldn't the new deal from KM compete in the open market with other developers who might be prepared to pay more?

There's big $$$$$ for KM in this thing, and perhaps also for, as KM says, "another related party controlled by the trustees" - so investors should be mindful of the earning potential for these entities.

I think the unit price in the LMMPF is going to sink like a stone with at least one failed second mortgage (behind the LMFMIF's first mortgage) and the substantially reduced value of Maddison.

This is a new deal, and a meeting will have to be called and a explanatory memorandum sent to each member - you'll all get more details with the memorandum.

I'm a little confused about the $250m debt - where will it go? will it be written off when the only security asset is sold? As I see the structure of NewCo, NewCo will own the land - the fund doesn't seem to have a lien over either NewCo or Maddison.

Pre-existing members get (1) a share of the proceeds of the sale of Maddison, and (2) a share of development profits after (1) the developers share is taken out, (2) the directors of NewCo make a nice earner (perhaps from KM or Calibre), (3) NewCo's expenses, (4) the facility provider earns a nice $$$, (5) the shareholders (as disclosed as under Option C or Option D) make their nice earner, (6) KM's fund management fees, and (7) LMMPF expenses.

and to boot, the security of Maddison seems to have gone (or at least at this time, this issue hasn't been spoken to).

I'll reserve the right to reassess this posting and amend it later if necessary.
The posting may contain errors.
The good ol' disclaimer - do not act without advice from a licenced financial advisor.
 
LM MPF



Property development is a risky business.

Here's a graphic I did in relation to risk / contribution / income (as I see it):
http://www.moneymagik.com/km_mpf_proposal.jpg

Also, in relation to the sale price of Maddison being returned to LMMPF investors, that should be less the facility debt to Suncorp which I understand to be about $20m.

IF the value of Maddison is about $30m (as spruiked in the media), then LMMPF investors will get LESS than $10m from their (about) $250m investment. I note KM says that the principal is $113m with the remainder being interest - sadly, both principal and interest (at impaired value) represent unitholder equity.

Couple this with the potential loss of an (about) $48m second mortgage (behind the LMFMIF), then it all makes for a dire future for LMMPF investors.

Could LMMPF return be more or less than about $0.10/unit? I think it probably could be.
 
Correction.

Okay, I've had time to read the document more carefully.

It's the fund that buys shares (via Option C or D) in NewCo by way of the proceeds of the issue of priority units in the fund.

It is not the priority units which hold the shares in NewCo.

I'll amend this graphic to comply with that:

http://www.moneymagik.com/km_mpf_proposal.jpg
 
I think the graphic is okay now - if you see errors, let me know, I'll fix them up pronto.
http://www.moneymagik.com/km_mpf_proposal.jpg

It's interesting to note that KM says that if Suncorp appoints a receiver to Maddison, then the return may be zero. To me, that sounds like KM don't have much confidence in the market value of Maddison exceeding the $20m Suncorp facility (plus costs).

Perhaps Maddison isn't even worth $30m?

Like many of you, I'm still getting my head around the KM document.

It seems that the fund's equity in Maddison will determined by the proportion of share holding in NewCo held by the fund (subject to higher priority lenders to NewCo).

Since monies would be paid by the fund to NewCo - NewCo would then proceed to buy the land from its present owners, and any surplus proceeds (after costs such as those of a receiver (if one has been appointed)) would be directed to the fund.

As I see it, everyone else will make money, with any overflow going to investors. If Maddison is really worth $0 to the fund, seems pre-existing members have nothing to lose so the choice is (1) permit KM and others to make money (if KM is able to get the deal up and going) and hope for sprinklings on the other side, or (2) let Suncorp appoint a receiver and sell Maddison in a competitive market and see what happens, geez, it might attract a decent price.

I'm curious about:

1. If there are surplus proceeds of the sale of Maddison paid to the fund, will those proceeds be solely paid back to pre-existing members? or split in some way between the two classes of unitholders? (working on KM saying that a receiver would return $0 to the fund on the sale of Maddison, then it's probably the case that there would be zero return to investors if Maddison was sold to NewCo).
2. How will monies returned from NewCo (once it's up and going) be directed between the different classes?
3. How do pre-existing investors escape the fund? and if they're able, at what price?

It seems to me that the $250m debt would be paid down with proceeds from the deal, but whether that would help pre-existing members is another thing altogether, especially if such proceeds were directed to priority unitholders.

We should keep in mind that KM notes that the options are INDICATIVE ONLY.
 
SOMETHING IS REALLY ROTTEN

Something is really rotten with a system that allows a manager to crank a loan up to $250m on the back of an asset which reportedly could be worth not much more than $20m.

Geez, Maddison could have caught Suncorp with an LVR of 100% !!!!
 
Frozen Funds - an opportunity for some

Some information about how investors in the WC PIF are faring.

Wellington Capital Supplementary Explanatory Memorandum dated 1 June 2012:
http://www.wellcap.com.au/assets/pif/updates/2013/021727065.pdf

On Page 14, "Previous experience with similar assets and relatively superior outcomes: The Board of Asset Resolution Limited have significant background in the key issues of workout situations. In addition, Asset Resolution Limited has retained FTI and Castlereagh Capital to provide professional services to assist it in the realisation of value for the assets held by Asset Resolution Limited. FTI Consulting Inc. is a New York Stock Exchange listed company, headquartered in New York. FTI has a market capitalisation of approximately $1.0 billion and annual turnover of approximately $1.6 billion. As a global business advisory firm, FTI provides multi‐disciplinary solutions to complex challenges and opportunities."

Some background on Castlereagh Capital (CC):
CC ran for the WC PIF - a meeting was called: http://cascap.com.au/admin/include/...stlereagh_Announcement_-_Bid_May_11_FINAL.pdf
The meeting was declared invalid: http://www.wellcap.com.au/assets/pi...itholdermeetingdeclaredinvalid_13july2011.pdf
CC made it into the game: "Asset Resolution Limited has retained FTI and Castlereagh Capital to provide professional services to assist it in the realisation of value for the assets held by Asset Resolution Limited."
http://www.nsxa.com.au/ftp/news/021727065.PDF (see page 4)

Wellington Capital NSX Release dated 5 September 2012:
http://www.wellcap.com.au/assets/pif/updates/2012/nsx release-sale-of-assets-to-arl-5-sep-2012.pdf

"Wellington Capital Limited as responsible entity of the Premium Income Fund is pleased to announce that Asset Resolution Limited (ARL) has today acquired $90.75 million in assets from the Premium Income Fund (Fund)."

[Note: on page 5 there's comment about FTI & KMQ - but since then KMQ and FTI split - FTI survives with ARL]

Asset Resolution Limited audit reviewed accounts as at 31 December 2012:
http://www.wellcap.com.au/assets/pif/updates/2013/021727060.pdf

See:

{assets transferred to ARL on 5 September 2012 (see above) - so, these figures represent FOUR MONTHS OF TRADING BY ARL - Assets transferred totalled $90.75m]

Page 10, Expenses, Consultancy Fees: $930,810
Page 10, Total Comprehensive (loss) attributable to unitholders: $14,550,941
Page 11, Total Equity (equivalent to "Assets Attributable to unitholders): $40,854,059
Page 11, Percentage Loss (calculated as Retained Losses / Owners Capital) = - 26.3%
Note 4, Page 20: Impairment loss $13,226,220 off $50,465,000 + $3,940,000
[$90.75m revalued as $50,465,000, and $ ? revalued (?) as $3.94m]
It seems to me that the loss, looking through to the value as assessed from the WC PIF is more like -67%.
Note 6, Page 20: $257,248 spent with a business in which a director of ARL (Jenvey) is a partner.

WC PIF investors must be in shock.

Please read all the referenced documents in full to get a glimpse of Wellington Capital, FTI, and Castlereagh Capital in action.

Yes, life is fun for some in a frozen managed fund (or whatever form it morphs to), just not for investors.

Does anyone think it'll be any different for LM investors?
 
LM MPF

Thanks ASICK,

So what are gathered from your valuable feedback is that that no matter what is the outcome for ME , the existing unit holder will remain with big 0... This sounds like one big mastermind Ponzi scheme by Peter Drake and his directors.. I'm really wondering how Australian authorities can allow something like that.and which actions will be taken.. Most probably none... As majority of foreign investors (like me )have very little influence on the scenario which is happening in Australia ..
 
Re: LM MPF


As far as the LM MPF's equity in "Maddison", that's the case. The (about) $48m second mortgage behind the LM FMIF (in my view) is gone. I haven't put any effort to looking at the rest of the fund, but as you'll note in the PIF's assets shuffled off to ARL (my previous posting), costs and impairments simply shatter unitholder equity.

I wouldn't feel too bad about being a foreign investor, locals don't fare any better in these schemes.

I think the best thing investors in a damaged fund can do is form a group and communicate with each other - until this happens, management most definitely has the upper hand. Frankly speaking (and please forgive me for saying it) managed fund investors as a group are really quite stupid by not coming together and giving themselves power. I think Storm investors did well to form a group, and the achieved results speak for themselves.

And again, frankly speaking, I agree wholeheartedly with you, the loss at "Maddison" is breathtaking - I think that even if a claim is made, there's no more to recover from LM than $20m in insurance (and as I understand it, the $20m would have to be shared if claims are made by other LM funds). Of course, I suspect valuations will come under scrutiny. Any class action claim made by Piper Alderman would further substantially diminish unitholders' share of any litigation proceeds (viz-a-viz the fund bringing an action without a litigation funder)

So many of us have lost money in these schemes - the Federal Government, in my view, has a lot to answer for in relation to the legislative structure of same.
 
Re: LM Fundless

ASICK said:
I wouldn't feel too bad about being a foreign investor, locals don't fare any better in these schemes.

I think the best thing investors in a damaged fund can do is form a group and communicate with each other
Click to expand...

There is a very small but growing group of mainly Thailand based investors trying to do that. However it is vastly under represented when compared to the large number of investors believed to have been signed up by LM even locally. With various LM funds involved and various different IFAs it's not so easy to formulate concensus on what next, but there is still the overriding commonality of LM to discuss. It is unusual that there aren't similar groups springing up around Asia and the Middle East with other scammed investors. Has any forum reader heard of other groups, or forum threads?

Formation of groups by some other interested parties however, are raising some concerns. I understand that there are also various groups being formed by IFAs trying to become involved in some of the funds. Some of these guys also claim to be investors too. My personal opinion is that IFAs as creditors have different interests to those of investors and should therefore be viewed with some degree of suspicion. Remember - they are the ones who got us into this mess in the first place.

What still baffles me is the lack of hue and cry from the thousands of domestic Aussie investors. Is there nobody in Australia, except this thread's No.1 poster ASICK, who is overly concerned about the whole sorry situation? The business journo Michael West from the SMH kept some publicity going, but appears to now be cowed by a 'defo' suit from Drake & Co. The BFCSA webite (http://bfcsa.com.au/) specialises in financial services fraud but has little about LM in there, although lots of other Aussie investment and property scams. It's a very popular pastime down the Gold Coast way.

With the execption of a few respectable firms already involved, I'm surprised the ambulance-chasing lawyers haven't started already. " Have you had an accident at work or been mis-sold a LM Investment fund? Start your Claim now and call us now on Freephone......"

Overall, it really needs a consolidated approach to the situation. From the way LM have obviously tried to keep investors divided and poorly informed, it's clear that a major company or institution working on behalf of the investors is necessary. What a pity that the ASIC haven't been required to do anything like that.
 
Communications & Opportunities

Good morning Loiner.



I think the way forward is to start off an account and ask for contributions to buy the register. Once the register is in hand, attempt to contact the larger unit holders by mail or phone. Try to gain further contributions in order to reach out to all investors. Seek members' emails in order to provide timely and cost-free communications on an ongoing basis. Open a website - its' cheap .. for example, go to: http://au.godaddy.com/ Point members to the website.

Until then, alternative sources :

For Equititrust EIF: http://moneymagik.com/equititrust.php
For LM funds : http://moneymagik.com/lm_investment_management.php
For Wellington Capital: http://moneymagik.com/well_cap_pif.php
For Trilogy Funds Management: http://moneymagik.com/three_part_trilogy_funds_management_tragedy.php
(http://moneymagik.com/info_letter_re_pacific_first_mortgage_fund.pdf - to be updated)



It always stuns me as to how these managers can act, both in their own best interests, and investors' best interests. The recent spruik from KM about the (indicative) proposal is a great example. If the deal goes ahead, KM would stand to earn no matter what happened (as would others - facility provider, developer, equity partner, and perhaps, priority unitholders) by taking advantage of investors' misfortune - All KM has to do is hold out a "carrot" that pre-existing investors might get a sprinkling from the deal.

Simply put, why couldn't KM strike a deal for unitholders directly with a developer able to buy out the debt and develop the land? But then I guess KM isn't going to be on a big earner (both from the development and management fees from new investment into the LM MPF), and that's not helping KM's bottom line.

While my experience in managed funds is limited, it seems to me that these managers are very opportunistic and do what's (legally) permitted to be done to enhance their own (and/or a relative/s) bottom line.

 
More on ASIC

A snippet, "It was not a pleasant week for the corporate regulator. As if the revelations of the 16-month delay to investigate the cover-up in Commonwealth Bank's financial services division were not harrowing enough.

Then there came news that more than 100 low-doc loan victims who had filed formal complaints of fraud last July had been advised to ''get a lawyer''. Their supporting evidence was ignored."

Read on: http://www.smh.com.au/business/more-fuel-for-the-asic-fire-20130607-2nvqv.html
 
Hi,

I am yet another overseas investor who has seen their pension evaporate, I’m conscious that advisors give the health warning that investments can got down as well as up, but by “can go down” I didn’t think this included total extinction!

I’m pleased I have found this forum, because it’s somewhere to go to get up to date information and translation for non-financial literate folks, like me (thanks to ASICK).

I, like hundreds or even thousands of fellow investors out there, now face the very real and painful prospect of starting my retirement with less money in my pocket than when I started work some 40 plus years ago.

Reading all of the rhetoric and hundreds of column inches on the nefarious activities of LM and even if the courts throw this guy Peter Drake in to gaol and lose the key, what I’m trying to understand in layman’s terms are:
  1. What are the realistic chances that I will ever see “any” of my money again? (me thinks I know the answer to this one)
  2. If the chances are slim, but possible or probable, is it likely to be in my lifetime? (I plan to live a good couple of decades after retirement, albeit begging on street corners)
  3. What recourse, if any, do I and the hundreds of other unsuspecting investors have against the IFAs that convinced us to invest our pension money (only last year in my case) in this seemingly “low risk” fund?
  4. Clarification of the term my IFA used in breaking the news to me that my pension had de-materialised, as if by including the words they abdicate any professional responsibility: “Our bond and platform providers have done their due diligence and accepted these funds into their portfolio of funds.” In legal, financial, accountability or responsibility terms, what does “due diligence” really mean to the investor?
I’d also like some views on a proposal my IFA is running past us, the out of pocket investors. Their idea is to generate a fund of around AUS$ 22M, to take to Suncorp, to buy out the first rank charge on Maddison Estate venture. On top of the first mortgage, Mr Drake and his organisation managed to secure a further AUS$ 113+M as a second mortgage. Now, I’m no mathematician, and I might be missing something here, but according to some valuations being touted, Maddison Estates is worth AUS$ 30M, at best. So what benefits would investors gain from “investing” a further AUS$ 22M? Isn’t it merely throwing good money after bad?

Last point, and I apologise if some of my questions have been addressed elsewhere in the forum, or that some of my questions appear naïve, but you’ll have to bear with me, it’s the first time I’ve lost my life’s savings. I class myself as an optimist and fighter, I just need to understand what I have to do to get some or all of my pension back.
 
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