Hearing told of developer's 'outrageous' fee structure

THE failed property developer Ualan Property Holdings took with it more than $20 million of superannuation money, but not before its principals had allegedly "loaded up the books" and charged the super funds administered by Trio Capital "outrageous" asset management fees.

By InvestSMART · 1 Mar 2012

By InvestSMART ·
1 Mar 2012

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For a second day, Michael Anderson, a director of the Silverhall asset management and property group - which was rebranded as Ualan - was questioned during public examinations brought by the new responsible entity for the super funds.

Silverhall is jointly owned by Cameron Anderson, his unrelated business partner Michael Anderson, and minority stakeholder Mark Weller. Cameron Anderson was one of the three founding directors of Trio Capital, and Silverhall was appointed initial manager of the property investments of Astarra Wholesale Portfolio Service.

Mr Robert Beech-Jones SC, for the super funds, questioned Mr Anderson about new and revised fees added to management agreements during 2008. The termination fees alone totalled $12 million, he said.

He detailed a project at Warners Bay, with a book value of $7.16 million, at the most. If Silverhall was terminated, Astarra/Trio was up for fees of $5 million, he said. Mr Anderson replied the fee reflected what the final development would be worth, about $70 million.

"This was to crystallise a decision to load up companies with huge fees in the event that their services were terminated," Mr Beech-Jones said.

"That's incorrect," replied Mr Anderson.

"You wanted to make them so burdened with fees and charges to your companies it would make it very difficult for Astarra [Trio] to take them out."

"No."

The hearing has heard that a Silverhall building company, CPI Property Investment Pty Ltd, redeemed loans from existing mezzanine finance investors, replacing it with superannuation funds loaned through Silverhall Residential Property Holdings.

Mr Anderson said the funds were earning 3 per cent in the bank, and needed to go into projects to generate the 12.5 per cent interest it would pay to investors. He rejected that his parents, who had been original investors, had been given priority treatment in payout out the loans. He agreed that some debt to SRPH had been reduced to zero because of an offset against fees.

The examinations continue.

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Frequently Asked Questions about this Article…

What went wrong with Ualan Property Holdings and superannuation money?

According to the public examinations, the failed developer Ualan Property Holdings took more than $20 million of superannuation money. The hearings allege its principals “loaded up the books” and charged what have been described as “outrageous” asset management fees on super funds administered by Trio Capital.

Which companies and people are named in the hearings about the fees?

The article names Silverhall (an asset management and property group later rebranded as Ualan), Trio Capital (the administrator of the super funds), Astarra Wholesale Portfolio Service (the property investment vehicle), CPI Property Investment Pty Ltd, and Silverhall Residential Property Holdings (SRPH). Individuals named include Michael Anderson, Cameron Anderson and minority stakeholder Mark Weller.

What specific fee issues were raised at the examination of Michael Anderson?

Counsel for the super funds questioned Michael Anderson about new and revised fees added to management agreements in 2008. The hearings heard that termination fees alone totalled about $12 million and that hefty fees were inserted that could apply if the manager was replaced.

Why did the Warners Bay project become an example of concern for investors?

The Warners Bay project was cited with a book value of about $7.16 million, yet the hearings heard a termination fee of about $5 million would apply if Silverhall was removed. Michael Anderson said the fee reflected a projected final development value of about $70 million, but counsel suggested the structure effectively burdened companies with large fees to deter termination.

How were superannuation funds used in place of other financing?

Evidence at the hearing indicated a Silverhall building company, CPI Property Investment Pty Ltd, redeemed loans from existing mezzanine finance investors and replaced that funding with loans sourced from superannuation funds routed through Silverhall Residential Property Holdings.

What return did the managers say they expected from using super funds in projects?

Michael Anderson told the examination that the superannuation money had been earning about 3% in the bank, and the funds needed to be invested into projects to generate the roughly 12.5% interest they expected to pay to investors.

Were there claims of related‑party priority payouts or offsets against fees?

The hearings addressed related‑party issues: Michael Anderson rejected suggestions his parents received priority treatment on loan payouts, but he agreed that some debt to Silverhall Residential Property Holdings had been reduced to zero because of an offset against fees.

What is the current status of the investigations and what should everyday investors learn from this story?

The public examinations into these matters are ongoing. For everyday investors the case highlights key takeaways: always check fee schedules and termination clauses, watch for related‑party transactions, demand transparency on how investor money is deployed, and consider how projected development values are used to justify large fees.