Mayfair investors ‘will get their money’

Mayfair 101 founder James Mawhinney says Grant Thornton provisional liquidators’ report is ‘largely unsubstantiated’.

Mayfair 101 founder James Mawhinney says Grant Thornton provisional liquidators’ report is ‘largely unsubstantiated’.

Mayfair 101 founder James Mawhinney has vowed that investors in his stricken funds will recoup their losses by Christmas despite a preliminary liquidators’ report claiming the investment vehicle was in trouble from the outset.

Mr Mawhinney’s plan was to develop $1.5bn worth of projects in far north Queensland, including 107 residential and commercial properties in the tropical township of Mission Beach and a revamp of Dunk Island.

On Friday, he labelled a Grant Thornton’s provisional liquidators’ report into the affairs of M101 nominees as largely unsubstantiated.

“It’s a report for a company that has been operating for six months. The financials were only draft and are not yet lodged. It still needs to be finalised,” Mr Mawhinney said from his Melbourne base.

Despite this, Grant Thornton believes there is a low likelihood of the recovery of $44.4m which was advanced to another Mayfair company, known as Eleuthera, which served as Mayfair 101’s treasury unit. Some $21.7m of this used to pay a “large amount of operating expenses” of the group.  Mr Mawhinney said the Grant Thornton report confirmed the funds were used in a compliant manner, adding that he had provided Grant Thornton with a breakdown of how the funds were used. “We have every application of funds in line with the offer document we provided investors,” he added.

Mr Mawhinney said the majority of the $44.4m went into Mission Beach real estate investments and another portion of the money “went into our other investments here in Australia and offshore”.

It went into various unlisted companies such as the London-based financial technology company Accloud, while some of the money went on consultants who were working up Mr Mawhinney’s plan to develop a 130-room hotel and 100 residential apartments on an island in Venice.  “The real estate we own there in Venice has 6000sq m of approvals and we are in the process of getting up a new application,” he said.

“We have provided a reconciliation to Grant Thornton as to how the funds from Eleuthera Group were used and we have no concerns as to the use of funds being compliant and within the scope of the offer document.”

Mr Mawhinney is particularly incensed with Grant Thornton’s contention that “any claims made to investors or potential investors regarding M Core noteholder funds being secured may be deceptive and misleading on the basis that the investor funds are not supported by first-ranking, unencumbered asset security …”

Mr Mawhinney said: “We categorically refute paragraph 43. It is incorrect. We have provided first-ranking security in line with the offer documents to our noteholders.”

He said he was well advanced with the preparation of a restructuring plan that would see the project in Mission Beach continue and importantly “preserve value for the investors in this product”.

“It is a process we began a couple of months go and involves refinancing assets in Mission Beach and replacing the current trustee and implementing a new advisory committee.

“The current trustee, Pinnacle Advisory Group, was not the right fit — they have not fulfilled their obligations,” he claimed.

Mr Mawhinney reckons more funding is in train from a syndicate of wealthy families, which he declined to name.

He has been contacted by many of his investors and advised them it would take time to resolve the issues.

“Unfortunately, the way this has transpired with ASIC has been hugely destructive for investors and caused significant liquidity problems. We feel like we are having to rebuild the business as a result of the ASIC action. The people mostly impacted have been the investors,” said Mr Mawhinney, adding he had invested in the group and had lost millions of dollars.

“I have personally reinvested in the group to keep things moving. There is a lot to protect for our investors and we want to prove the naysayers wrong because we feel we have been labelled guilty and are now having to prove our innocence.

“We are confident we can get a restructure in place by Christmas.”