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Aspen fund risks fire sale

PERTH-BASED property investor Aspen Group has warned it will be forced to dispose of properties in one of its unlisted funds at fire sale prices should an attempt to raise money from the already embattled unit-holders fail.

The company has told stakeholders that Aspen already had a $50 million exposure to the Aspen Diversified Property Fund and would not bail out the fund, according to an email obtained by WA Business News.

The correspondence came one week after the listed Aspen Group announced it had successfully raised more than $80 million through a capital raising, used to secure enhanced senior debt facility terms with financier National Australia Bank.

"To reiterate, therefore, the current situation is that unless the fund raises additional equity, the fund will be forced to dispose of properties at fire sale prices in which case it is probable that most, or all, of the existing investor's equity will be lost," said the email, which was signed off by managing director Angelo Del Borrello.

Mr Del Borrello ruled out recapitalising the fund - which has breached its loan covenants with the NAB - on the grounds that shareholders could not be expected to underwrite all risks linked to the product, as Aspen Group was already the single largest investor ($20 million) and a major unsecured financier (through a $30 million loan).

Unit-holders have invested more than $60 million in the Aspen Diversified Property Fund, which owns six office buildings, two retail sites, and four industrial complexes across Australia. The company's other unlisted retail offering, Aspen Parks Property Fund, has a strong track record, with annualised double-digit returns during the past three years.

The diversified fund entitlement offer seeks to raise between $15 million and $25 million through units priced at a 90 per cent discount to the last published price. Aspen argues that the offer is not a discount but a representation of the worth of the portfolio of property assets should they be sold on the market in current conditions.

Tony Robertson, of PBD Wealth Management, said Aspen should use some of the money from the listed group's capital raising to keep lender NAB at bay, rather than turning to unit-holders for more money, or selling assets.

"It's like putting a gun to the head of exisiting investors," Mr Robertson said.

Investors in the fund will have their investment diluted should they reject the offer.

Mr Robertson has 14 clients with a combined $1 million exposure to the ailing product.

He said that the reputational damage Aspen faces meant it was in the interest of shareholders for the company to bail out the fund.

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Aspen Group (APZ)

Share Price

Closing price for the last 90 trading days
Source: Morningstar

Total Shareholder Return as at 29/06/18

1 year TSR5 year TSR
500thAspen Group-5%-5%
722 WA (and selected non WA) listed companies ranked by 1 year TSR relative to other companies with similar revenue
Source: Morningstar

Share Transactions

01/10/15
$46k Issued
30/09/15
$260k Bought
30/09/15
$0 Other
Total value as at the date of the transaction
Source: Morningstar

Revenue

th-Aspen Group$15.8m
77 listed non wa companies ranked by revenue.
Source: Morningstar

Remuneration from Aspen Group

222ndAdam Marrs Ekamper$488k
867thGuy Farrands$112k
917thClive Appleton$98k
Ranked by total remuneration from all listed WA companies

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