Estate Property To Sell 21 Sites

Sydney Morning Herald

Monday July 9, 2007

Danny John and Vanda Carson

THE administrators of the collapsed Estate Property Group plan to establish a single fund to handle the sale of 21 development sites owned by EPG, and that fund will then be used to pay its individual lenders.

Under a plan to be put to investors of EPG's fund raising arm, Australian Capital Reserve, all the proceeds from the property disposals will be "pooled" and then distributed on a regular and equal basis to secured noteholders.

The fund will be established as part of a deed of company arrangement that will determine the future management of EPG, up to the point when it and its various subsidiaries can be wound up as part of a long-term liquidation process.

But the first stage will be to sell enough of the group's assets to pay back $224 million of loans owed to its bankers. Proceeds from the remaining assets will then flow through to the investors' fund.

EPG's biggest secured creditor is the Commonwealth Bank which, with its funds management subsidiary Colonial First State, lent $107 million to the property developer. EPG's other major lenders are Capital Finance, owed $31 million, and Investec Bank, with an exposure of $25 million.

According to court documents lodged by EPG administrators McGrath Nicol, the financiers have agreed to support a strategy formulated by property adviser CB Richard Ellis to dispose of each of the properties through a staged auction process.

Both sets of administrators, McGrath Nicol and PricewaterhouseCoopers (acting for Australian Capital Reserve), have opted for the one fund rather than a series of different financial arrangements as it will streamline the collection and payout process as well as reduce administration costs.

They have yet to indicate how much they expect to raise for ACR's investors, who are owed $332 million, but hope to give them a better idea of how much they might expect at the next creditors meeting which is to be held at the end of August.

The administrators have also devised a separate arrangement to allow EPG's construction arm to come out of voluntary administration and reapply for its NSW building licence when it expires on July 26, just over a fortnight away.

This will involve a change of ownership and transfer of certain financial responsibilities from Estate Constructions so that it can regain its licence within a two-month grace period allowed by the NSW Department of Fair Trading.

During that period it will be able to continue trading so that it can eventually complete the three projects it is now working on. These are a development of 42 villas near Newcastle, 58 apartments in Wahroonga and a 25-storey block of units in Church Street, Parramatta.

The administrators hope to raise tens of millions of dollars from their eventual sales. According to documents lodged in the Federal Court, the EPG companies that own the three sites have debts of at least $124 million between them.

Of that, $52 million is payable to Capital Finance, Adelaide Bank and Commonwealth Bank, which have first mortgages. The remainder, $72 million, is owed to ACR's individual investors.

© 2007 Sydney Morning Herald

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