Kelly Slater dealt blow as investment company falters
The Kelly Slater Wave Company has been dealt a blow with today's announcement that LM Investments has been placed into voluntary administration. LM Investments is being investigated by the Australian Securities and Investments Commission for multiple breaches of corporation law.
LM Investments is a fund manager that reportedly holds $3 billion worth of investors funds and operates in 70 countries. In a recent ABC investigation LM Investments were found to be making misleading claims about its operations and were involved in a dubious property development called Maddison Gardens at Pimpana, north of the Gold Coast. 62.5% of LM Investments entire portfolio is invested in Maddison Estate.
The land at Pimpana was bought for $89 million between 2007 and 2009. Property prices have since slumped and the ABC claims that the borrowings on Maddison Estate now amount to $240 million.
Further, there are 800 lots of land for sale at Maddison Estate which equals the entire number of lots sold on the Gold Coast last year. Not a single lot has yet been sold at Maddison Estate.
Maddison Estate has been advertised as a lifestyle housing estate with celebrities such as gardener, Jamie Durie, beach volleyballer, Natalie Cook, and swimmer, Samantha Riley, all lending their name to the venture and the various parks within the estate.
A wave pool was also planned at Maddison Estate and this where the Kelly Slater Wave Company becomes involved.
Last August LM Investments signed a Memorandum of Understanding with the Kelly Slater Wave Company to develop the world's first continuous wave pool at Maddison Estate. The Kelly Slater Wave Company has been in a first-to-market race with Webber Wave Pools and this news appeared to give the Kelly Slater Wave Company the lead.
Meanwhile, stories questioning the integrity of LM Investments and its founder, Peter Drake, were beginning to appear in the press. In May, Michael West at Fairfax called Drake, "The Scarlet Pimpernel of funds management", questioning his mysterious operations.
West followed that in October with another, more damning article. "A man with so many hats and masks can't help but be elusive" was written after unsuccessfully trying to contact Drake for many months and also researching the labyrinthine structure of LM Investments. West also began to contact investors in the fund who were being left out of pocket.
In November it appeared that, despite the negative press, LM Investments were strengthening their relationship with the Kelly Slater Wave Company. A press release was sent out stating that the company would be on site at Maddison Gardens to inspect the estate and also holding a press conference. In attendance would be Noah Grimmett, General Manager of Kelly Slater Wave Company.
Swellnet immediately emailed Grimett to ask if we could speak to him privately while he was on the Gold Coast. He promptly replied asking if we could send the press release to him, which we did. It appeared he wasn't even aware of the details within the press release.
The following day the inspection and the associated press conference at Maddison Estate were cancelled.
Earlier this month the ABC program Four Corners picked up the trail that Michael West had found and launched an investigation. In a program titled 'Betrayal of Trust' they discovered breaches in LM Investment's business practice and informed ASIC Chairman, Stephen Metcalf. "Thank you for telling me," said Metcalf on camera, "We'll take a closer look at it."
Which leads to today's news that LM Investments has been placed into voluntary administration. LM Investments maintain that, if finished, Maddison Estate would be worth between $1 billion and $1.6 billion although it's unlikely they will get the opportunity to realise that now.
Where that leaves Kelly Slater and the race to build the first continuous wave pool is anybody's guess, however today's news is a resounding setback for the 11-time world champion. Swellnet has contacted Noah Grimmett but is yet to receive a reply.