Mayfair scheme to redevelop Dunk Island ‘may sink investors’: report

Provisional liquidators Grant Thornton warns that Mayfair 101 investors may have ‘little or no hope’ of clawing back their financial investments.

Mayfair 101 founder James Mawhinney at Mission Beach: All up 122 Mission Beach properties worth $108.4m were exchanged with deposits of $7.49m paid by Mayfair.

A provisional liquidator’s report into the beleaguered financial investment house Mayfair 101 reveals investors have little or no hope of clawing back their financial investments into a unit of the group which focused on buying up hundreds of millions of dollars worth of real estate assets in Far North Queensland.

Mayfair 101 had promoted controversial plans to transform Dunk Island and Mission Beach into a $1.5bn tourism mecca, but Grant Thornton was appointed as provisional liquidators of debenture schemes backing the plans in a Federal Court case last month.

Mayfair 101 provisional liquidator Said Jahani, national managing partner of Grant Thornton, said in a report to the court that of the $107.9m investors ploughed into the Mayfair investment vehicle just $63m was used to make real estate investments.

“It is my preliminary finding that in a winding up proceeding, creditors of the Company (effectively the M Core noteholders) would receive no return,” Mr Jahani said.

The other $44.4m was advanced to another Mayfair company, known as Eleuthera, which served as Mayfair 101’s treasury unit, as inter-company loans, with $21.7m of this was used to pay a “large amount of operating expenses” of the group.

“I have been unable to determine as part of my review how the funds provided as inter-company loans to other entities in the group were used,” said Mr Jahani in his report.

“The majority of the funds invested were provided to a related entity, Eleuthera Group Pty Ltd on an unsecured loan basis for a term of 10 years at a rate of 8 per cent per annum. The company did not hold any security over the assets of Eleuthera,” he said.

Mayfair 101 founder James Mawhinney, the entrepreneur behind the project, has previously denied any wrongdoing and insisted that the resort project will go ahead.

Grant Thornton’s Mr Jahani noted that the majority of entities that are indebted to Eleuthera are the subject of separate insolvency proceedings with steps being taken to sell these entities’ assets for the benefit of their secured creditors.

He said a number of the remaining entities that are indebted to Eleuthera are based overseas and the exact nature and recoverable value of these assets was unclear.

He added that the company’s entitlement to recover the funds due from Eleuthera, if any asset recoveries are made, will need to be shared pro-rata with all other creditors of Eleuthera.

“My overriding conclusion is that the business model of the company was not sustainable,” Mr Jahani said.

“This is on the basis that M Core noteholders were investing predominantly for periods of 6 or 12 months, however the loan agreement with Eleuthera had a term of 10 years.

“On this basis, the company would not have adequate funds to repay any contributions as they fell due and as such the company has been insolvent since inception and remains insolvent as at the date of this report.”

Mr Jahani said the matter would soon return to court for a hearing as to whether the provisional liquidation should be converted into an official liquidation.

The prospects of the island being developed by the under-pressure firm were already fading in the wake of the assets of another Mayfair unit, the $80m IPO Wealth Holdings vehicle, being wound up.

The court had already been told in a report by a Deloitte expert that Mayfair 101 revalued Dunk Island from $18.2m to $49.7m which Mr Jahani said was above the potential value that could be recovered if the Island were to be sold. “The valuation I have sighted dated August 2018 included a market value of $28.2m,” he said.

All up 122 Mission Beach properties worth $108.4m were exchanged with deposits of $7.49m paid by Mayfair. More than $100m is needed to finalise the purchase of the apartments, houses, commercial property and vacant land. But McGrathNicol, as receivers for a separate senior lender Napla, have already stepped in to recover loans linked to 107 properties.

Mr Jahani said “while these deposits have been paid, I have concern that if sufficient funds cannot be obtained to settle these properties, the deposits may be forfeited and the security value of the assets for noteholders will be lost”.

The report shows Mayfair had contracted to purchase residential property worth $21m, commercial worth $4.8m, vacant land valued at $23.59m and Dunk Island for $31.5m.