They seek him here,
They seek him there,
Those Frenchies seek him everywhere.
Is he in heaven,
Or is he in hell?
My own elusive Pimpernel.
Marguerite in The Scarlet Pimpernel, by Baroness Emmuska Orczy.
The fine people who work the phones at LM Investment Management don’t think Peter Drake is mysterious. They say the dashing figure behind the $3 billion fund empire is not mysterious at all.
He is always jetting about somewhere though. And it is hard to escape the conclusion that - at least for this lowly reporter who has been striving to contact him for months – he is at least elusive.
Many of Peter’s investors whose savings are frozen in LM Investment Management’s funds, would like to see a little more of him.
Take Sam Leonardi. The retired cane farmer from Mossman in Far North Queensland needs an operation on his knee but can’t afford to pay the gap. Sam’s life savings of $220,000 are frozen in the LM First Mortgage Income Fund.
"Haven’t seen a dividend for three years," says Sam. “I have been fighting with them for years now to get my money back.” He can’t get Centrelink because his investment in LM is counted, ironically, as an investment.
Will Peter grace investors with his presence next week at the big meeting for LM’s Wholesale First Mortgage Income Fund and Currency Protected Australian Income Fund? To the chagrin of those assembled for the last meeting of unit holders in the LM First Mortgage Income Fund, he was dashing about in foreign climes.
This time, Rodger Bacon of Trilogy fame is seeking to wrest the management rights from him. It could be a gory duel for the Scarlet Pimpernel of Australian funds management.
In the wake of the financial crisis in November 2009, some $25 billion in funds around Australia were frozen. It is now around $11 billion.
Gold Coast mortgage funds were especially hard hit. Of LM’s funds, four are frozen, but among those which remain open is the LM Managed Performance Fund.
This “unique opportunity” caught your correspondent’s eye because 60 per cent of the fund is a loan to a property development named Maddison Estate, some 30 kilometres north of Surfers Paradise and just up the road from Dreamworld.
According to company searches, the international man of mystery himself, Peter Charles Drake, appears as the sole director in the company which owns the property.
Peter has a grand vision for Maddison. He has struck a memorandum of understanding with 11-times world surfing champ Kelly Slater to build the maiden Kelly Slater Wave Pool.
Gardening guru Jamie Durie has signed on to do the landscaping and Olympians Sam Reilly and Natalie Cooke are on board as All-Star Ambassadors for the pool and beach volleyball.
The celebrity numbers surrounding Maddison are just as impressive as the celebrities themselves. Over $217 million of the $370 million in the LM Managed Performance Fund is committed in this single project yet it appears that investors have only a second mortgage.
Suncorp is owed $22 million ahead of investors in the LM Managed Performance Fund and of the $217 million presently owed by Maddison, $101 million is capitalised interest on the loan. The acquisition cost of the land was $76 million.
Interest is paid to Suncorp, distributions are paid to investors, and management fees paid to LM. These are now five per cent but can rise as high as 10 per cent each year.
Let’s not forget the fees to financial advisers. Those who tipped the investors in receive another 3 per cent per year. With a touch of extravagance, the marketing materials for the fund describe it as a "bank-like facility".
Back of envelope, you could smoke $30 million a year, on this one project, just to keep the money flowing.
The Australian Financial Review has mooted a market value as low as $30 million on Maddison. After all, the Queensland hinterland is hardly booming.
LM rejects this. Its own valuation must have grown a lot lately to justify its further lending. Last September, the largest loan in the fund was $142,155, 456. This had risen to $191 million in July, $211 million in August and to $217 million in September.
Notwithstanding this impressive increase in loans to Maddison, $75 million in less than a year, there is nothing to indicate an increase in value of that proportion. Our Gold Coast operatives confide that the site has not been fully cleared and other people already appear to be living on the 118 hectare estate. Neither are surveyors’ pegs easily visible to the naked eye.
Mind you, a lot of money has been spent so Jamie Durie may well bob on the scene at any minute, hoes at the ready. These big projects take time and painstaking preparation.
The work has been well and truly done on the financial preparation however. Peering behind the various entities, the LM group is headed by Peter Charles Drake.
The owner of the Maddison property is Coomera Ridge Pty Ltd and this company has one director, Peter Charles Drake.
The second mortgagee which has presumably been provided with the money from investors is a company called LM Coomera Pty Ltd (now renamed Maddison Estate Pty Ltd) which has one director also, Peter Charles Drake, and one shareholder, LM Coomera Holdings Pty Ltd.
This company also has one director - you guessed it, and one shareholder, LMIM Asset Management Pty Ltd.
LMIM Asset Management Pty Ltd has only one director and one shareholder too - Yes, that’s right.
In light of this labyrinthine arrangement, Peter Drake the lender must talk to Peter Drake the borrower to establish if the loan is performing, or in default – and to agree on terms. Perhaps, in order to be arms length, one Drake exempts the other from attendance.