More than 1,800 Irish investors caught up in the collapse of a German property group last year are being told of the difficulties they face in any attempt to get hold of assets on which they have a claim, and which have an uncertain value.
The Germany Property Group (GPG), formerly known as Dolphin Trust, collapsed last year after taking more than €1 billion from investors in the Republic, the UK, Asia and elsewhere since it was set up by businessman Charles Smethurst in 2008.
The group had raised €107 million from Irish investors by way of issuing loan notes, an unregulated product, for the purpose of buying and renovating listed buildings in Germany with promises of annual returns of as much as 15 per cent. The first signs of defaults on interest payments on the Irish notes occurred in late 2019.
Wealth Options Trustees Limited, based in Naas, Co Kildare, acted as administrator and distributor in Ireland for the loan notes, which were sold to investors through a network of 144 brokers.
It said in a letter to brokers this week that global law firm Dentons, which it hired to act for Irish investors, had confirmed that certain property securities "exist", are "largely within Dentons' control" and "can be linked" to two Irish special purpose vehicles – MUT 103 Ltd and Dolphin MUT 116 Ltd. These security documents have a "face value" of €85 million, it said. Wealth Options Trustees is the administrator of these vehicles.
It said that further paperwork was required to get hold of security documents over another property, which Wealth Options said had a face value of €92 million.
However, a footnote to the letter states that the face value refers only to the value of the security registered in land registry records, An independent valuation obtained by Wealth Options in 2018 suggested the valuations on the combined securities were about 37 per cent lower.
Value of security
Furthermore, the valuations were based on the completed gross development values of the properties – after the deduction of development costs and developers returns – and not their current state. “It is therefore expected that the current value of the security (which would not take account of any development potential) is lower than these estimates,” it said.
Meanwhile, Wealth Options Trustees warned that Dentons faced potential legal challenges enforcing security as a result of ongoing fraud investigations in Germany and as GPG is going through the insolvency process.
Wealth Options Trustees said it was organising a series of 50 creditor meeting of Irish loan note holders to assess future options, and that it could take at least three months or “considerably longer” to convene and hold.
“[Wealth Options Trustees] has discharged the substantial expenses that have been and are being incurred by [it] in its capacity as administrator of the MUTs,” it said. “Since [it] is no longer in receipt of administration fees from the GPG Products, [it] does not see itself being in a position to continue this work beyond the organisation of the investor meetings.”
The High Court is set to hold a hearing on March 1st of an application of a petition to wind up one of the special purpose vehicles, MUT 103.
Kathleen Dineen of Rosewood in Ballincollig, Co Cork, who is represented by the Dublin office of international law firm Clark Hill, is listed as a creditor of MUT 103.
