Jamie Durie's garden designs wilt as Gold Coast mortgage fund manager LM Investment Management placed in voluntary administration

Jamie Durie's garden designs wilt as Gold Coast mortgage fund manager LM Investment Management placed in voluntary administration
Larry SchlesingerDecember 7, 2020

A Gold Coast-based mortgage debenture fund that raised money from small investors and lent it on to residential and commercial developments including the $1 billion Maddison Estate project promoted by celebrity gardener Jamie Durie, two Olympians and a Kelly Slater wave pool company is now in the control of administrators.

The directors of property developer and fund manager LM Investment Management (LMIM) have placed the company in the hands of voluntary administrators warning investors it is in “imminent jeopardy of being unable to meet creditor obligations” in a statement which has since been removed from the website.

John Park and Ginette Muller of FTI Consulting were appointed voluntary administrators.

One of its mortgage funds has as its flagship investment project the 800-lot Maddison Estate on the Gold Coast, which was set to feature parks and gardens designed by celebrity gardener Jamie Durie, who also fronts the development's marketing website.

The Gold Coast Bulletin reported in January that tree clearing and demolition on the site had been completed with civil construction work set to begin bringing forward the release of 29 lots.

It was designed to eventually cater for 3,500 residents with a mix of townhouses and apartments as well as shops and restaurants.

Land is advertised for sale starting from $205,100 with house and land packages starting from around $430,000 for a four-bedroom on a 320 square metre block.

Home builders assigned to the project are Metricon, Clarendon Homes, Plantation Homes and Ausbuild.

The project was promoted with other celebrity endorsements including a Sam Riley swim school, a Natalie Cook beach volleyball centre and a Kelly Slater-designed continuous-wave pool.

A creditors meeting is set for April 2 at Sofitel Gold Coast Broadbeach with the administrator expected to investigate the value of the fund's property loans including it's exposure to Maddison Estate.

 

lmimmarch25one

In barely readable small print at the bottom of the website it says: "Delivered on behalf of investors in the LM Managed Performance Fund" with a link to the LMIM website.

The LMIM website says the fund aims to deliver returns of between 3% and 5% above Central Bank rates - returns of between 6% and 8%.

Investors in the fund have a 60% exposure to Maddison Heights through a $234 million second mortgage with a smaller first mortgage to Suncorp.

The first 29 lots had a September 2013 completion target.

The Prodap report for the fourth quarter of 2012 recorded just 23 vacant land sales in Pimpama with Gold Coast land sales at 30 year lows.

The site was purchased for $89 million prior to the GFC, when the market was at its peak.

LMIM joins a growing list of mortgage funds that have run into financial trouble including Victorian-based Banksia (in October) and Provident Capital (in July).

Managing director Peter Drank said (in a statement since removed from the website) that LMIM had “responded appropriately to the circumstances it faced” following Trilogy, a property focused fund management group based in Brisbane, taking control of  its LM Wholesale First Mortgage Fund in November last year.

“We have been on the receiving end of Trilogy’s relentless ten month campaign of alarming and misleading statements to our domestic and international advisers and investors. This has impacted the liquidity of our funds, and therefore investors’ interests," said Drake in a statement since removed from the website.

“This campaign has been magnified by the additional impact of the strong Aussie dollar (particularly against Sterling), resulting in excess margin requirements for the funds very recently.”

 


“Had we not acted, this perfect storm of impacts meant we may have been unable to meet our obligations, and hence the appointment.”

“The funds will continue to be managed in accordance with their governing documents and the applicable Corporations Act and Trustee Law. The FTI team will be working with LM’s senior investment personnel to optimise outcomes for all stakeholders.

“The ultimate aim of the voluntary administrator is to manage and resolve a solution over a period of time," said Drake.

A further statement on the website that the "proactive approach by the board to officially bring in independent financial advice across the company and the funds" has also been removed with FTI Consulting taking control of the business, reported Fairfax.

In March, the ABC's Four Corners program reported that investors, many of them pensioners had lost around $15 billion over the past five years by investing management investment funds offering high returns.

LMIM operates a number of closed mortgage funds with money from investors invested in a portfolio of Australian registered first mortgages over commercial, residential, industrial, retail and vacant land.

Investments in LMIM mortgage were marketed extensively via financial planners.

The ABC reported that LMIM had borrowed $250 million to fund the Pimpama development with a very large second mortgage making up 62.5% the assets of the LM Managed Performance Fund, which has grown to more than $240 million.

“FTI Consulting will conduct a review of the business and all of the LM funds and will update unit holders as a matter of priority,” said voluntary administrators John Park and Ginette Muller.

LMIM claimed to have $3 billion in funds under management with investors in 73 countries, according to the Gold Coast Bulletin.

Property Observer requested a copy of the LM First Mortgage Income Fund financial report on its website, but received replies saying that it was “experiencing a higher than usual number of queries.”

A second email said: “LM has appointed a Voluntary Administrator.  Until such time as the Administrator has conducted their initial investigation, we are unable to provide you with a copy of this report.” 

 


Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

Editor's Picks