ASIC moves on Hermitage Bendigo land banking scheme administrators

ASIC has commenced proceedings in the Victorian Federal Court against land banker company administrators, David Anthony Ross, Richard Albarran and the landbanking company, Midland HWY Pty Ltd (Midland HWY) (administrators appointed).

Messrs Ross and Albarran, of Hall Chadwick Chartered Accountants, are the current appointed administrators of the controversial land bankers, Midland HWY.

But the administrator appointment on July 14 has become the subject of ASIC's proceeding in which ASIC seeks their removal as administrators or to invalidate the first meeting of its creditors held on July 14.

Midland HWY had previously appointed Messrs Nicholas John Martin and Craig David Crosbie of PPB Advisory as joint and several administrators, just two weeks earlier.

Prior to being placed into voluntary administration on 2 July 2015, Midland HWY was the developer of a land banking scheme known as, Hermitage Bendigo (formerly, 'Acacia Banks'), located just outside of Bendigo, Victoria.

"ASIC is concerned that the appointment of Messrs Ross and Albarran, as replacement administrators to Midland HWY, occurred in circumstances where many investors in Hermitage Bendigo, who may also be creditors, were not given notice of the first meeting of creditors," ASIC advised.

The matter is set down for hearing on August 3, 2015.

The financial advisor Scott Pape, known as the Barefoot Investor, warned investors last year not to lured by spruikers into speculatively buying rural zoned land his central Victorian district.

The land banking process involves paying a $40,000 option on a portion of a larger rural parcel of land in anticipation of residential zoning.

In seven to 10 years' time the buyer has the option to buy or sell it, and supposedly make capital gains after rezoning success by the property spruiking investment firms.

"The mob behind this have reportedly been selling options on paddocks around my home town of Bendigo," Pape told his Herald Sun readers.

"I think it’s a giant, steaming, dog turd of a deal," he advised.

Last year the Urban Development Institute of Australia chief executive Tony De Domenico warned buyers to be careful about paying for options or reservation fees on land that ultimately may or may not be developed.

Hermitage Bendigo has been loosely aligned with longtime notorious property spruikers.

Last month the Australian Securities and Investment Commission told members of the Senate Economics Legislation Committee they were "making inquiries" into land-banking schemes involving millions of dollars from mum and dad investors.

Land banking spruiking has been also marketed in outer western Melbourne, Ballarat and Wallan.

Buying land, not houses was pushed as the most suitable investment strategy by the marketeering companies for the mum ands dad investors.

It used options to buy land as opposed to borrowing money and paying interest on the land for a decade or more waiting for it to rise.

“Especially if you can use ‘property options’ to avoid borrowing, it means you get all the upside of capital growth without any interest repayments or holding costs or the need to beg a bank to loan you money,” was the pitch.

Buyers were told that if they were able to secure an option over a future lot of land worth $150,000 today, in ten years time they could expect the land to be worth $300,000 or more of in a fast growing area.

“A great idea to action now, for children to lock in property at today’s prices.

"Or you can resell the option for a handsome profit and never need to buy the land as it has intrinsic value.

“The best thing about property options means you aren’t obligated to buy i.e. as they are simply call options, you have no risk and can walk away at any time.

“Plus if the option is by a legitimate supplier, they will offer a 100% money back guarantee if the worse should happen and the development doesn’t proceed, secured by the land development itself.

“These quality 100% money back property options secured by real estate are becoming highly sought after products for savvy investors."