Pier Hotel talks

PARTIES are locked in confidential negotiations to sell the defunct Riverside Pier Hotel project on Perth’s foreshore, as out-of-pocket investors await news of any likely return.

Three hundred investors – who can more accurately be described as lenders, as they do not own the underlying asset – sunk $15 million in mezzanine financing into the project, in near identical circumstances to those who backed failed property developer Westpoint.

Investors deposited the money with South Perth-based Finchley Central Funds Management, which previously raised capital for Westpoint.

Finchley co-founder Simon Bell told WA Business News sale negotiations were confidential.

“It’s close but not quite there yet,” Mr Bell said. “I’m not allowed to comment further than that.”

The idea to develop an 86-room, floating hotel on the Swan River was pitched in the late 1990s, and more than a decade on there is only some unfinished foundation work and an unmanned crane at the prime Barrack Square address to show for it.

Out-of-pocket investors, who expected to receive distributions of 12 per cent per annum, were initially paid the handsome monthly dividend, although it soon dried up.

One investor said Finchley told him several months ago he might receive roughly 20 cents in the dollar of his outlay after the sale.

Mr Bell declined to comment on whether investors would retrieve any money. He has previously said red tape was to blame for project hold-ups, but the reason for the sale was a lack of funding. The buyer is expected to develop the project.

Investors would not have any continuing interest should the project be sold, with a sale expected by the end of the week.

The scheme prospectus shows Finchley was paid commissions of 11 per cent of all funds raised from the public.

Mr Bell started Finchley, then known as Kebbel Investments, with business partner Richard Beck in 2001.

The company was later used to distribute funds for Westpoint, and is now being wound up after the corporate watchdog found that the company and its officers failed to comply with their legal obligations.

Jennifer Low of Perth-based Sheridans Chartered Accountants has been appointed by the courts to wind up the fund manager.

The hotel project is separate to the fund manager.

Finchley also raised money for projects on the east coast, including a 1,100-unit retirement village resort in Mount Gilead in Sydney’s south-west, which failed to progress beyond a clubhouse and a handful of display homes.

The fallout from the schemes has largely been overshadowed by the 2006 collapse of Westpoint, which left 4,000 investors out of pocket by a combined $300 million.

Financial planner Rick Maggi, managing director of Perth-based Westmount Securities, said mezzanine finance schemes had all but dried up.

“I’ve never had much to do with them, but I think for the time being they are dead in the water. I’ve found their projections to be overly optimistic and fees are over the top,” he said.