ZACD chases I-Prosperity cash

Hong Kong company ZACD Group is stepping up its efforts to recoup money from the collapsed I-Prosperity property empire.

Hong Kong company ZACD Group is stepping up its efforts to recoup money from the collapsed I-Prosperity property empire. Picture: iStock

Hong Kong company ZACD Group is stepping up its efforts to recoup money from the collapsed I-Prosperity property empire with a prominent Sydney law firm denying that it had mishandled money intended for a major hotel deal and saying it had called in the police.

The collapse of the once high-flying fund manager I-Prosperity has left the Australian property sector reeling. The company had claimed the backing of wealthy Asian investors as it put together a series of luxury hotel and commercial property deals.

The largest local transaction would have seen I-Prosperity buy a portfolio of 23 AccorInvest ­hotels for close to $250m last September. It had the backing of ZACD but the deal was hit by repeated delays and eventually renegotiated with fewer hotels and for a lower price.

But even this was scuttled as I-Prosperity called in administrator Cor Cordis two weeks ago and some of its international deals were reported to have been not completed.

Sydney law firm Landerer & Company was last week named by ZACD as holding money on trust to be used in the AccorInvest deal, in which a fund it manages was investing alongside I-Prosperity.

In a series of filings in Hong Kong, ZACD said a price of $212.6m for 17 hotel freeholds had been renegotiated last month but raised questions about the handling of funds held by Landerer & Company.

It said that under an escrow letter issued by the Sydney firm in March a sum of $37.5m was only to be used as the subscription money in respect of units payable in an I-Prosperity vehicle by the ZACD Australia Hospitality Fund “upon transaction completion and with the specific written consent from the HK company”.

After carefully reviewing the terms with another law firm, Thomson Geer, ZACD said it believed the deposit had been released by Landerer to an I-Prosperity-linked hotel fund trustee without its consent.

It claimed the release was undertaken by the law firm without proper confirmation, safeguards and procedures customarily required by the law profession, and therefore constituted a breach of an escrow letter and negligence.

ZACD instructed Thomson Geer to issue a formal letter of demand on July 24 to Landerer & Company to demand that by 5pm on July 29 it pay back the ZACD funds, failing which it said it would “institute all legal proceedings necessary to recover that amount and other losses incurred”.

However, Landerer & Company denied the allegations and said it had acted correctly and had called in the NSW police.

“We confirm that Landerer & Company is the law firm referred to in the Hong Kong Stock Exchange announcement. The firm acted in accordance with written instructions received from the parties. The firm has reported the matter to the NSW Police and we understand it is under current investigation by them. We are not aware of any legal action that has been commenced against the firm,” the law firm told The Australian in a statement on Wednesday night.

The cause of I-Prosperity’s sudden collapse remains unclear after an initial creditors’ meeting on Monday held by Cor Cordis heard about $130m was being claimed. Voluntary administrator Barry Wight is refusing to discuss the issue with the media.

ZACD has separately appointed KPMG over one I-Prosperity entity as it seeks to recoup its funds and that firm also declined to comment.

ZACD had been backing I-Prosperity’s acquisition of the AccorInvest hotel portfolio for about $212.6m and had raised about $45m via the ZACD Australia Hospitality Fund for the transaction.

The original target completion date of the deal was around March. But due to the pandemic and the deteriorating market conditions and the withdrawal of a key investor for I-Prosperity — believed to be a Singapore group — it held more talks with AccorInvest and subsequently entered the new, lower price deal.

The sale portfolio changed to exclude six leasehold hotel properties and the original purchase price of $212.6m for the 17 hotel properties was negotiated down.

The deal was extended with an additional deposit of $8m to be paid by June 24, which was extended to July 21, but the deadlines were missed.

“It is presently in the public domain that a substantial number of companies under I-Prosperity Group were recently placed under voluntary administration in Australia,” ZACD said.