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Withering on the vine

I WAS interested to learn that the financial failings of companies associated with WA’s biggest vineyard development have attracted more than a passing interest from the State’s self-appointed corporate watchdog, Denise Brailey.

Ms Brailey’s dogged pursuit of the finance brokers was, arguably, what brought down the Court Government.

Well some of those finance broking connections twist and turn their way into the complex web of dealings that surround the Preston Vale vineyard development at Donnybrook.

Put together as a tax-effective investment in 1998-99, Preston Vale was close to being the most expensive development of its type, attempting to raise $41.4 million over three years at a cost of $156,545 per hectare to develop.

That’s almost four times the amount Agriculture WA suggested was needed to develop a basic vineyard, and well above the $65,000/ha leading winemakers suggested was necessary to create a top vineyard.

No wonder in November 2000 (then) Opposition fair trading spokesman, and current WA Attorney General Jim McGinty, suggested in parliament that, of the $28 million raised more than a year earlier, only $9 million was spent on the business of growing grapes.

At the time, those figures were disputed by the promoters, even though independent valuations in their own prospectus showed that the fully developed vineyard (had the full $41 million been raised) was only going to be worth $14.1 million after five years.

Well, whatever it cost, it has all turned out to be something of a financial disaster.

Several companies involved are in some state of receivership or administration, including key company Southern Wine Corporation, the manager of the Preston Vale vineyard, which is controlled by listed mining junior Tuart Resources.

In an ASX announcement, Tuart has revealed that SWC doesn’t have enough money to keep managing the vineyard, even though it has only just started the fourth year of the project (when it was meant to start making a profit).

It is asking for the ‘growers’, jargon for investors in the grape growing side of the business, for a further $2 million to help them. To some people that might look like throwing good money after bad. Alternatively, the managed investment scheme could be ended.

According to Tuart, the death of the MIS would mean the “ownership structure of the vineyard will be simplified”, enabling the company “to more readily deal with its beneficial interest in the vineyard”. Reading between the lines, that sounds like selling the land might be an option. Given SWC holds a 60 per cent stake in the land (including the vineyards), that might be a course Tuart would want to pursue.

Of course, that might not be in the original MIS investors’ best interest, particularly when the Australian Tax Office takes a dim view of any project that fails, for whatever reason, to follow the plan outlined in the prospectus.

What a mess. Maybe the prospectus had a clause that allowed the investors to sack the manager and take control of their investment.

That would need someone to get 800 or more investors together to take on the incumbents, and who would want to organise something like that … Ms Brailey?

Seven reasons to mothball centre

IT has been a big week for the usually reclusive WA media magnate Kerry Stokes

Reports have it that the businessman was awarded a gold medal by the WA division of the Australian Institute of Company Directors, an opportunity Mr Stokes capitalised on by commenting on corporate governance.

That event followed wide publicity about the future of the Perth Entertainment Centre, something the Seven Network chairman has taken a keen interest in.

The well-known Wellington Street venue is being mothballed, taking no further bookings as of this week while owner Seven decides what to do with it after the State Government walked away from plans to redevelop the site.

So, why the personal interest in such a comparatively small issue by the chairman of a national television network?

Because he’s a Perth resident and the bloke who sold the Entertainment Centre to Seven in the first place.

That was almost four years ago, when Mr Stokes’ private company, Australian Capital Equity, sold the centre and a few other associated assets to Seven for $23.5 million.

Back then, the deal raised a few eyebrows among stock market analysts, who were a bit miffed by what was a surprise deal between the company and its chairman of the board – who also happened to be its biggest shareholder – even though it was accepted that Seven had other venue interests.

Because the deal was insignificant – at least in ASX terminology – the details did not have to be disclosed and a shareholder vote was not required. At the time, property market observers suggested the value of the land could be as high as $22 million. That is lucky, because when the stadium lights go out it won’t be offering the lure of an 8500-seat box office drawcard, deemed such a strategic fit a few years ago.

In fact, Seven want to demolish it and put in shops, apartments and restaurants.

That’s very different from intentions when it bought the site in December 1998, reporting to the ASX that the purchase would enhance Seven’s leadership in the WA television market.

“The acquisition will also build on our commitment to community life in WA – with a landmark development in the heart of the city committed to bringing major events to our State,” Seven issued in a statement.

Since then, there has been no doubt that Seven has wanted to be involved in development of the site.

The Entertainment Centre location was central to the failed Nexus bid for the Perth Convention and Exhibition Centre, which in my opinion would have been a better site than the one currently under construction.

The Nexus bid included a soccer/rugby stadium and a broadcast centre, so it is not as though Seven has completely ignored its own statement from the start. Development remains a driver, but it seems the TV company has grown weary of running a venue that brought major events to WA.

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