The trustee, Korda Mentha, previously outlined two options to investors, both of which would have required additional funding from unitholders. The options “C & D” in a list of four proposed options, effectively required unitholders to invest more in order to proceed with a key development, called Maddison Estate, held within the fund.
The LM Managed Performance Fund purchased the land for the Maddison Estate development for $250m using a loan from Australian financial institution SunCorp which holds a first mortgage over the development. The loan was in fact due for refinancing on 30 June, but the trustee said it has not yet had clarity from SunCorp on its intentions.
Option C would have required investors to pledge a certain amount of the money required to resurrect the Maddison Estate development, with assistance from a new capital partner, meaning it could start making repayments to SunCorp and hopefully make a return to investors in the long term.
Meanwhile, option D would have required unitholders to pledge all the money required and to purchase the first mortgage from SunCorp.
However, according to Korda Mentha’s ninth investor update, which was released last week, an initial pledge of less than A$1m from unitholders means there are “insufficient funds to pursue options C or D”.
Korda Mentha did however point out that “it is aware there is a number of financial advisers who are seeking to raise additional monies to add to this pledge amount, however as yet the trustees have not received any formal confirmation of additional monies”.
In light of the funding shortfall, Korda Mentha said the “most commercially attractive alternative” is an offer it has received from a third party to purchase the land, although it warns that any such sale “will provide a limited return comparative to the $250m owed to the fund”.