Bad Loans Put Clarke in Prime Light
Unitholders may be interested to read the attached article from The Australian Financial Review dated 18 September 2012.
The article raises issues surrounding the large losses incurred on the Trust's exposure to developer loans. We believe that investors were not adequately informed of these loans and the high risks associated with such loans. The 2005 Product Disclosure Statement, for example, prominently states (page 2) that Prime Trust ".. is suited to prudent investors seeking a long-term property investment from a soundly managed property-based income stream”. We would strongly argue that the investment of unitholders' funds in high-risk development loans, on a second or third mortgage basis, was not "prudent", and nor did it represent "sound management".
We also understand that there was no attempt to disclose to potential investors:
* that unitholder funds would be lent on a second and third mortgage basis
* that funds would be lent to entities associated with Mr Lewski
* that certain APCH Directors, namely Mr Clarke, Mr Butler and Mr Jaques, were also directors of at least three developer entities associated with Mr Lewski
* of the amounts, if any, paid to the directors from or through the developer entities as project management fees, consultancy fees, director fees etc
* of the high risks associated with such developer loans
We also note that there was no attempt to obtain unitholder approval for the above related party benefits, in much the same way as there was no approval sought from the unitholders before the listing fee payment of $33m was provided to entities associated with Mr Lewski. We also note that the Trust incurred losses of $48m in 2009 as a result of these developer loans and that multi-million dollar losses have been recorded on the developments associated with Mr Lewski.