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http://www.theaustralian.com.au/business/property/pif-asset-sale-row-has-day-in-court/story-fn9656lz-1226741194427

PIF asset sale row has day in court

THE High Court will decide on November 8 whether it will hear a case in relation to Wellington Capital's sale of nearly $91 million worth of property and mortgage assets, potentially affecting up to 10,000 retail investors in NSW and Queensland.

As responsible entity for the Premium Income Fund, Wellington Capital sold $90.7m worth of PIF's distressed assets including mortgages over the Kooralbyn Resort in Queensland in September last year to Asset Resolution.

Wellington distributed the $90.7m as ARL shares to PIF unitholders.

Under pressure from PIF unitholders, the Australian Securities and Investments Commission immediately challenged Wellington's decision to pay the PIF unitholders in shares and lost. In October last year, Justice Jagot held that Wellington Capital did not act in contravention of the PIF constitution when it distributed the shares in ARL to PIF unitholders.

ASIC appealed against that decision and won before the Full Court in May this year. Wellington Capital subsequently lodged an application for special leave to go to the High Court.

"The High Court don't have to hear it, (but) we are pleased they have decided to," Wellington Capital's Brisbane-based managing director, Jenny Hutson, said yesterday.

The assets included distressed loans over properties including a vacant 203ha site in Mission Beach, far north Queensland, and the 144-room The Forest Resort Group hotel and 18-hole golf course in Creswick, Victoria.

One of the largest assets, however, the Kooralbyn Resort, is the most difficult in the portfolio, according to ARL's latest report to the market.

"Holding costs are high, but failing to adequately repair and maintain the property will rapidly reduce the remaining value," ARL said.

Agent CBRE has been trying to sell the Kooralbyn Resort since August and "negotiations with interested parties are continuing".