Mayfair 101 unit falls into liquidation as watchdog steps up

Regulator trying to protect investors putting intense pressure on the high-flying funds manager.

The corporate regulator has won a key legal battle to appoint liquidators to part of the Mayfair 101 property funds empire, which had proposed turning Queensland’s Dunk Island and its surrounds into a $1.5bn tourism mecca.

The plans were derailed as Mayfair lost control of both the dilapidated island resort and more than 100 properties on the mainland, with the embattled company facing further legal claims.

The Australian Securities & Investments Commission has obtained orders from the Federal Court that will see Grant Thornton step up to liquidate M101 Nominees Pty Ltd, which raised about $67m via secured debentures known as M Core Fixed Income Notes, amid fears they may suffer heavy losses.

ASIC is also seeking orders that Mayfair founder James Mawhinney be permanently restrained from advertising any financial products or soliciting funds for them in a separate case that goes to court in the middle of February.

Mayfair investors are already imperilled, with Dunk Island now back under the control of the Bond family, which is seeking a fresh purchaser for the resort. About 108 properties on Mission Beach are also in the hands of senior lender, Napla, that is also chasing buyers.

But embattled Mayfair founder Mr Mawhinney says the funds company will fight on to deliver for investors and the company is defending the remaining court action.

The regulator said it had sought to protect the assets of M101 Nominees and M Core noteholders where there appeared to be insufficient funds to repay investors.

Receivers Dye & Co. who were called into Mayfair‘s IPO Wealth unit, had also raised concerns about how the investments had been handled and Mayfair is alleged to have commingled funds.

Said Jahani and Philip Campbell-Wilson of Grant Thornton will become liquidators, after being called in as provisional liquidators last year to preserve the unit’s assets.

M101 Nominees had raised the $67m from investors during 2019 and 2020, saying that funds invested would be fully secured when they were not, the regulator said. M101 Nominees halted repaying funds to investors in March 2020 and froze interest payments to investors from June 2020.

Grant Thornton warned last September that M101 Nominees had been insolvent since it began in late 2019. They said the business model of M101 Nominees was unsustainable because the security provided to note holders was negligible.

The overall Mayfair group owes about $211m to investors in products, including the M Core Fixed Income Notes, M+ Fixed Income Notes, the IPO Wealth Fund, IPO Capital and Australian Property Bonds.

ASIC acting chair Karen Chester said the regulator had moved “decisively” by taking direct action early last year and then via the courts to “restrain Mayfair from promoting these allegedly misleading products and to protect not only potential new investors but also the interests of existing investors”.

“This action is one of several we have under way … targeting fund managers not doing the right thing by investors — especially those fund managers preying on unsophisticated investors, such as older Australians and retirees in regional Australia,” Ms Chester said.

Mayfair insisted the notes were secured by first-ranking registered charges over a collateral pool pledged by its entities, and comprised 14 unit trusts that held real estate assets in Mission Beach and Dunk Island.

Mayfair said the collateral pool was managed by a security trustee, PAG Holdings (Aust) Pty Ltd, part of Melbourne accounting firm Pinnacle Advisory.

Mr Mawhinney sought to lay blame for the problems with PAG. The decision to consent to the winding up orders was a “necessary step”, he said.

Originally published as Mayfair 101 unit falls into liquidation as watchdog steps up