Developer shakeout goes to the knee-breakers

Via the ABC:

Melbourne underworld figure Mick Gatto was retained by at least one investor to help recover money from the messy collapse of a major property developer that left investors owed millions of dollars, according to court documents.

The allegation is contained within an affidavit filed in the Victorian Supreme Court by former Steller Property Group partner Nicholas Smedley.

Until recently, Steller was redeveloping Sorrento’s landmark Continental Hotel, on Victoria’s glitzy Mornington Peninsula.

In the affidavit, Mr Smedley states he was a director of the three companies holding approximately $40 million in investors’ funds — Otway Funds Limited Pty Ltd, Steller Investment Notes Pty Ltd and Steller Property Funds Pty Ltd.

The Victorian Supreme Court was last week asked to decide whether they should remain in the hands of administrators.

According to the affidavit, Mr Smedley’s then co-director of the companies, Michael Burstin, was coming under pressure to return money to investors in the ill-fated companies.

“On or around late August 2019, Michael told me that somebody had come to his house to threaten him for repayment of money owed to the Chinese third-party investors,” Mr Smedley said in the affidavit.

“Some time following that, Michael said to me words to the effect he, ‘suspects one of the investors has retained Mr Mick Gatto to recover his investment’. I was very worried for Michael — and myself since I was the director of [the company] — and I wanted to be supportive of him given the threats and pressure he told me he was enduring.”

Mr Gatto declined to comment when contacted by the ABC.

Concerns grew after pub meetings with Gatto

According to the affidavit, a series of meetings variously involving Mr Smedley, Mr Burstin, Mr Gatto, a longstanding associate of Mr Gatto’s called John Khoury, and other people subsequently took place at restaurants and pubs in Carlton, West Melbourne and North Melbourne.

Mr Smedley said it later became clear to him the purpose of these meetings was to pave the way for an insolvency consultant called Wayne Fraser to take over the companies.

However, Mr Fraser, from the firm Maxum International, was unable to attend the first meeting he was supposed to be at, held on September 11 at a Carlton pub.

“I understood that Wayne was meant to attend this meeting, so that I could meet him, but I was told by Khoury at that meeting that he had been stopped by the Australian Federal Police in Brisbane and that his … computer and phone were seized,” Mr Smedley said in the affidavit.

“This further worried me, as I did not want to associate myself or the companies with someone like Wayne, who I understood from Michael had connections to Gatto.”

‘We were on the same team’

Mr Khoury disputes Mr Smedley’s version of events.

“We were on the same team, and he went and put the companies into voluntary administration,” Mr Khoury told the ABC.

In the affidavit, Mr Smedley said that at the fifth meeting, again at a Carlton pub, Mr Burstin suddenly introduced the idea Mr Fraser should be appointed the director of the three companies and take over the process of returning money to the investors.

Mr Smedley said he was strongly opposed to the idea, but despite this, Mr Burstin later told him he had resigned as director of the companies. Mr Fraser then told Mr Smedley he had been appointed as director in Mr Burstin’s place.

“I received a text message from Khoury, stating: ‘Thought you were on the same team you agreed to Wayne’s appointment and you said if Michael resigned you would too call Michael stop this bullshit please’,” Mr Smedley said.

“I reaffirm that at no point did I agree to Wayne’s appointment [which I believe to be invalid] nor to resigning if Michael did.”

In an interview with the ABC, Mr Fraser denied being associated with Mr Gatto, saying he had seen him once in a coffee shop.

He also disputed Mr Smedley’s claim that his laptop and phone had been seized by the federal police, saying he had voluntarily handed the phone and computer to ASIC investigators who were accompanied by Australian Federal Police officers. Mr Fraser said that investigation related to a client of his.

Mr Fraser said he had been retained by Mr Burstin to investigate the whereabouts of investor money held by the Steller group of companies and to return it to investors, and that he believed he had been legitimately appointed as director of the three companies.

The account set out in Mr Smedley’s affidavit has not been tested in the proceedings.

A separate affidavit filed by one of the administrators of the companies says his firm, SV Partners, which was appointed by Mr Smedley, is satisfied Mr Smedley is, in fact, the sole director of the three Steller companies, regardless of Mr Fraser’s claims.

At a hearing last week, Victorian Supreme Court associate justice Simon Gardiner agreed to extend the administration by SV Partners.

At a subsequent creditors meeting, an attempt by lawyers representing the majority of creditors to remove SV Partners as administrators failed.

Mr Smedley and Mr Burstin did not respond to requests for comment.

From what we’re hearing, it’s the banks that are doing most of the knee-breaking as mid-tier developers are siezed and properties completed and dumped en masse.  

It’s going to get worse.

Comments

  1. “On or around late August 2019, Michael told me that somebody had come to his house to threaten him for repayment of money owed to the Chinese third-party investors,” Mr Smedley said in the affidavit.

    There you go, all those apartments are nothing more than accommodation for Chinese colonists, it’s amazing how China is so thoroughly co-opted Australian society to act on behalf of its interests without anyone raising a finger.

  2. GunnamattaMEMBER

    ….and your bizarre factoid of the day is

    That in the mid 1980s a much younger Gunnamatta was the voice behind the mike at the Continental disco each saturday night for a year or so…..

    Am I ever gonna see your face again ….No way, get………………….off

    • I was at the conti club for many a saturday night during the early to mid 80s. You rocked ! hope your namesake still goes off when it’s 3-5ft and NE winds.

  3. Can only get worse / better. This collapse is going to be awesome. Every element of this banana republic’s flaccid economy will implode in concert.
    I will watch with interest from my new home in SW France, or our apartment in Copenhagen.

    • GunnamattaMEMBER

      The Mrs and I are chewing over buying back into Moscow with a holiday joint in Cyprus or maybe the Black Sea Coast/Caucasus

      Maybe we can do on every eve ‘Wish You Were Here’ post from Europe

      • I’d be tempted in sending “Wish you were dead…” postcards, or the slightly more subtle “wish you were there…” and the picture of a head stone, to quite a number of uhh… ‘respected’ elites members

  4. I once worked on a project in Melbourne (Lend Lease) hired Mick to sort the unions out.
    He also ran a crane company at the time. Called Elite cranes, I liked them because they always quoted to me on time and to be honest the wet hire crane rates were on par with industry standards. However the procurement manager didn’t want to know them due to our known company history of paying late.

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