Bridget Carter | April 02, 2009 Article from: The Australian
RECORD Realty Trust has become the latest Allco Finance-related business to collapse after its secured foreign lender called in a $186 million loan, triggering a potential firesale of properties worth up to $1.8 billion.
Craig Shepard and Mark Korda of KordaMentha have been appointed receivers and managers of Record Funds Management, the Allco Finance-owned subsidiary that manages Record Realty Trust, which is labouring under debts of $1.76 billion.
The receivership was triggered by a notice of default served by the trust's major secured lender, BOS International, demanding immediate payment of $186 million, which was agreed on in June2006.
Rubicon Europe Trust, headed by Allco director Gordon Fell, declared insolvency last month after unveiling a loss of almost $1 billion. The Rubicon America trust is also insolvent, and the future of Rubicon Japan Trust is uncertain. Investors have lost $1.3 billion in the three trusts.
Rubicon Holdings and Allco are both in administration. BOS International was stung by the collapse of the Australian Discount Retail chain, leaving banks owed a combined $96 million.
The latest recall could foreshadow further moves to call in other loans in the commercial property business.
HBOS subsidiary BOS International was named on a list distributed by industry lobbyist the Property Council of Australia as one of the 23 foreign banks that would be either withdrawing or scaling back their property lending in Australia.
BOS International would not comment yesterday on its exposure to commercial property, and said it had no plans to scale back lending in Australia.
Mr Shepard said one of his first jobs would be to complete a review of Record's investment portfolio with a view to seeking expressions of interest from buyers for the whole or part.
Record Realty Trust is listed on the Australian Securities Exchange and has been in voluntary suspension of trade since February 5, when its securities last closed at 0.6c, down from a from high of 97c, when its market capitalisation was $387 million.
Its properties have been on the market since March last year.
More than half of the 39 office buildings and industrial warehouses in its portfolio are in the US, a quarter are in Australia and the remainder are in Europe.
One of the trophy assets in the group's properties is its building at 20 Bridge Street in Sydney's central business district, which is the headquarters of the Australian Securities Exchange. The building was on Record's books at $195.5 million in June last year, before the worst of the credit crisis hit property values.
Record's second-largest Australian asset is the Centrelink Building in Canberra. The group's total assets were worth $1.83 billion at June.
Allco Finance Group had a 15per cent holding in Record Realty, which has been on the hunt for a new manager since late last year.
The Record Funds Management board had been considering a proposal for the recapitalisation of Record Realty and a change to the trust management, and has been in talks with BOI International for months over its loans.
The Melbourne-based Government Property Trust had bid $1.9billion for the Record Realty Trust, an offer Allco rejected.
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