Ualan 'loaded' super fees

FAILED property developer Ualan Property Holdings took with it more than $20 million of superannuation money, but not before its principals 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 Silverhallasset management and property group, which was rebranded as Ualan, was questioned during public examinations in proceedings 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.

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, at the most, $7.16 million. If Silverhall was terminated, Astarra/Trio was up for fees of $5 million, he said. Mr Anderson said 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," Mr Anderson said.

The hearing has heard a Silverhall building company, CPI Property Investment, redeemed loans from existing mezzanine finance investors, replacing them 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 were original investors, had been given priority treatment in a loans payout. He agreed some debt to SRPH was reduced to zero because of an offset against fees. The examinations continue.

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Frequently Asked Questions about this Article…

What happened with Ualan Property Holdings and the superannuation money linked to Trio Capital?

The article reports that failed property developer Ualan Property Holdings (formerly Silverhall) took more than $20 million of superannuation money from funds administered by Trio Capital. Public examinations allege its principals 'loaded up the books' and charged what were described as 'outrageous' asset management fees.

Which companies and people are involved in the Ualan / Silverhall and Trio Capital matter?

Key parties named in the article include Silverhall (rebranded as Ualan), Ualan Property Holdings, Trio Capital (the fund administrator), Astarra Wholesale Portfolio Service (whose property investments Silverhall initially managed), CPI Property Investment, Silverhall Residential Property Holdings, and individuals Cameron Anderson, Michael Anderson and minority stakeholder Mark Weller.

What specific fees are under scrutiny in the public examinations?

Examiners questioned new and revised management fees added in 2008, including termination fees that were said to total about $12 million. Regulators and lawyers described the asset management and termination fees as excessive in relation to the underlying assets.

How did the termination fees apply to the Warners Bay project mentioned in the article?

The Warners Bay project had a book value of about $7.16 million. The hearing heard that if Silverhall were terminated, Astarra/Trio could be liable for roughly $5 million in fees. Michael Anderson defended the fee by saying it reflected the estimated final development value—about $70 million—while examiners said the structure was designed to 'load up' companies with large fees.

Did the hearings reveal how super funds were used to replace other financing?

Yes. The article reports a Silverhall building company, CPI Property Investment, redeemed loans from existing mezzanine finance investors and replaced them with loans from superannuation funds routed through Silverhall Residential Property Holdings.

What returns were described for investors and why were super funds moved into projects?

Michael Anderson told the hearing that the super funds were earning about 3% in the bank and were moved into property projects to generate the 12.5% interest that would be paid to investors, according to his evidence.

Were there allegations of preferential treatment for certain investors in the Ualan/Trio case?

The article notes Mr Anderson rejected claims that his parents—original investors—received priority in loan payouts. He did agree some debt to Silverhall Residential Property Holdings was reduced to zero because it was offset against fees.

What should everyday investors take away from the Ualan and Trio Capital examinations about superannuation investments?

The hearings highlight issues investors should watch for: transparency of management and termination fees, potential conflicts of interest when fund managers and related parties are involved, and how super money can be used to replace other finance in property projects. The article shows these concerns prompted public examinations and legal proceedings by the new responsible entity for the affected super funds.