The risk came true....

[see_change]

Dazzling

I hope everything works out well. I'd think everybody around hopes it works out well . I know recently there were disagreements in posts, but that was more over aspects of the style of your posting rather than having a swipe at what you are doing.

The fact that you are prepared to share the highs and lows will mean that people on this forum will continue to respect what you have done and your willingness to share your story , even if they don't want to follow in your footsteps.

good luck

Cliff

 

[willair]

I'm trying to think laterally with all of this, and I quite fancy owning a passive chunk of an industrial rcycling waste management centre, rather than just the dirt it sits upon. Who knows where the possibilities might lead to ??

Morning Dazzling,there is not much more you can do sometimes these kicks
in the guts come out of nowhere,and of course there is no guarantee in
anything, but by the sound of things all this poor persons gear will go to
auction, maybe you could buy everything on your site on the auction
day and just resell the Business to someone else in that game,but
the last question has to always answered first,why did the Business
go this way,and $$$..IT will work out for you it's only the time it takes to
sort out the mess,but from what i know about Auctions and belly up
Businesses they wind up to the auction stage very quickly,and i don't
think it will be any different over your way..
good luck and stay happy willair..

 

[geoffw]

I hope everything works out well. I'd think everybody around hopes it works out well . I know recently there were disagreements in posts, but that was more over aspects of the style of your posting rather than having a swipe at what you are doing.

The fact that you are prepared to share the highs and lows will mean that people on this forum will continue to respect what you have done and your willingness to share your story , even if they don't want to follow in your footsteps.

Well said Seech.

 

[Pushka]

GST for us, is calculated by accruals, which means if people havent paid their invoices when the BAS is due, then you pay the GST from cash flow.

Daz, I didnt see all the angst from previous threads, but even if I had been involved you have been a lot of help to me. Hoping that this all pans out for you, sometimes, things just suck. And the law isnt exactly helpful. No wonder liqidators have nice offices.

In SA, Casual Living has just gone down this week (actually I thought this might have been your building interstate Daz). An iconic furniture chain here and owned by an acquaintance. Just this time a year ago Adelaide 'welcomed' its first IKEA store and several well known furniture places have now just closed down, or are struggling. So much for 'Buy Australia' - people want 'Buy Cheap' and cant say I blame them!

 

[Dazz]

Cheers Cliff.


More on the legal stuff....the wife and I weren't too encouraged with those two sections quoted.

We jumped on the ASIC website and found this...which gives us some comfort ;


Voluntary Administrator's Liability

Any debts that arise from the voluntary administrator purchasing goods or services, or hiring, leasing, using or occupying property, are paid from the available assets as costs of the voluntary administration. If there are insufficient funds available from asset realisations to pay these costs, the voluntary administrator is personally liable for the shortfall. To have the benefit of this protection, you should ensure you receive a purchase order authorised in the manner advised by the voluntary administrator.

The voluntary administrator must also decide whether to continue to use or occupy property owned by another party that is held or occupied by the company at the time of their appointment.

Within seven (7) days after their appointment, the voluntary administrator must notify the owner of the property in writing whether they intend to continue to occupy or use the property. If the voluntary administrator decides to continue to do so, they will be personally liable for any rent or amounts payable arising after the seven (7) days end.


It is also clear from the meeting agenda, that the appointed voluntary administrator is not against us as such....and the first item of the creditor's meeting is whether to continue with them or sack them. They don't work for my tenant, and don't appear to be worming out of stuff.

Can't wait for the meeting on Monday...cos it'll be 7 days by then. I'll either get a purchase order from them, making them liable for the rent and outgoings (and there's a bunch of them coming down the pipeline in the next few months) or they get the don't come Monday and they can conduct the auction of the equipment offsite.

 

[GoAnna!]

Excellent news !

 

[charttv]

A "set and forget" investment, eh! Hell will freeze over before I ever find one of those. I recently walked away from a proposed direct business purchase when I realised that i'd never be able to find competent management to run it so I can focus on other things. At the end of the day I was going to have to jump in and manage it myself which was not what I was looking for.

Good luck with this one Dazzling, i'm sure this will work out fine in the long run.

 

[JIT]

Thanks for sharing this with the forum Dazzling.

GSJ

 

[markp]

Hi Dazz

Yeah it happens (tenant goes bust)

We had a similar experience with our first industrial property. Picture this sitting in your lounge room watching the 6 oclock news and on the box you can see a group of people demanding payment of their wages and in the background you recognise your building and it is your tenant they are demanding their wages from. Shock! The tenant is unable to pay his bills.

Administrators were appointed. We too considered purchasing the business but after thinking about it gave this idea away.

The one thing in our favour was the machinery that the tenant had installed. Massive granite cutting and polishing machines had virtually become part of the building structure and it would take months to remove and clean up after the auction. Our solicitor did a fantastic job and held the administrators accountable for the rent and other stuff until well after the auction.(meanwhile we advertised the building for lease or sale)

The meetings I had with my solicitor and the adminstrators were rather fun and my solicitor and I still have a laugh about them today.

The happy outcome of all this was that we managed to sell the empty building for twice it's purchase price 18 months after purchase. Considering the 15000sft floor space that had been covered in concrete plinths and 18" water cooling channels that had been cut into the floor plus the building was now minus one wall and leaked like a seive, this was a good out come.

We tried to recover money through the directors rernt gurantees but gave that one away as it was going to be too costly.

So the landlord still got his rent I don't know how the other ceditors feared?

cheers

 

[kingchevy]

Wow very very interesting read I thank you for sharing you're experience's its an inspiration to say the least and it sounds like it wont work to bad for you I reckon I think you will find you're self with a rent increase and sounds like you won't lose any rent either I would say a blessing in disguise

 

[Dazz]

Agreed, I think we'll come out of this 'hiccup' sort of....OK.

We reckon our maximum exposure to loss will be circa 5K, so we may have to cop that on the chin and move on. If we get a whole band of solicitor's involved, that amount of money again would buy us about 3 or 4 one page letters....with a whole bunch of stress and angst thrown in for free.

Thanks for the link there keithj, I've sent off a quick note to them to dangle a rod in their waters, and see if anything bites. To upgrade tenants from a single one man band to a multi-national would be ideal. They are just around the corner anyway, so may bite at the opportunity that has presented itself.

I went out to the site yesterday and had a good sniff around. The place looks amazing compared to (a) when we purchased it back in March '05, and (b) when he took over in Feb '06. My tenant wasn't there, but a few of his workers were. I didn't raise the issue with them, but I got the feeling that they had no clue that their boss had gone into V.A. The employees of the business (according to ASIC docs) are treated in a special way, however they do rank below all of the secured creditors, so may get little or none of their entitlements.

 

[Pushka]

but I got the feeling that they had no clue that their boss had gone into V.A. The employees of the business (according to ASIC docs) are treated in a special way, however they do rank below all of the secured creditors, so may get little or none of their entitlements.

Poor people, I hope they at least had their Super contributions put into their accounts. Must have been dfficult for you too.

 

[Giulio Taranto]

you have got to feel for the workers. This has been a great read and there is lots to lear here, much appriciated.

 

[depreciator]

Dazzling,
I'm presuming the capital improvements are now owned by you? Your accountant may have told you this by now. If the tenant spent $300K, there's a deduction of $7,500 per year now available to you. Ongoing. If he was still there, you wouldn't get a sniff of this. That's not a bad outcome.
NB. I'm 99% sure of this.
Scott

 

[Dazz]

Cheers Scott for that.

I'm fairly sure that's what he's spent on the prop...it'd be close I reckon...but then at this stage I only have his word for it. We had a DEPPRO report done on the place just as we bought it. I might get you guys out there after this sh*tstorm blows over and you can re-assess the place. You charge about $ 150 for the report don't ya ??


When I attend the creditor's meeting and we may get to see the real picture...on paper....without any verbal embellishments. Obviously that's been happening a bit when he's been telling me everything is tickety boo, when clearly it wasn't. It was in his interest to tell me he was spending more than he really was, to use as leverage against me whenever future negotiations came up.


Anyway....hopefully the murky waters clear up a bit in the near future.


The agenda for the first creditor's meeting, always set for 7 days after the appointment of VA's is pretty flimsy. I wouldn't be surprised if the real picture doesn't come out until the second scheduled meeting of creditors happens, which apparently is always set at 35 days after the appointmnet of VA's. That's when we need to make a decision as to which way we go.


I'm very much looking forward to receiving a purchase order from the VA's this morning for the continued use of the property whilst they sort out the mess, which they are personally liable for. Given the rates they are charging per hour to sort out the mess, the rent impost should be a doddle.

 

[depreciator]

There is an obligation for vendors to pass on known construction costs. This is a bit of a different case. He would have the costs, though. You'll be able to take them to your accountant.
Scott

 

[JoannaK]

Hi Dazzling,

Voluntary administration, whilst it is the first nail in the coffin, is a mechanism that allows an otherwise viable business to continue to trade out whilst sorting out/trading out of a temporary unfortunate situation. It is very possible to trade out of VA completely and resume business as normal.

It allows a business to draw a line in the sand and quarantine his outstanding liabilities up to that point, and essentially allows him to start with a clean slate.

It wouldn't surprise me at all if you find that the only problem this guy has is with the ATO and a few minor creditors (yourself included).

At the 2nd creditors meeting they'll furnish their assets and liabilities and then he'll propose entering into a Deed of Company Arrangement with his creditors, and if the majority approve, then everyone has to go along with it.

Then, after approx 28 days things will be back to normal.

Well, for your sake I hope this is the case here, but he should have been man enough to at least clue you in before going down this road.

 

[Peter 14.7]

Please keep us informed Dazzling, Peter

 

[Dazz]

Yeah, you're right JoannaK, that sounds like the way it is going to play out.

Just got back from the meeting, and I'm pretty happy with my position as Landlord.

Amongst a whole bunch of other things, the VA confirmed that they wanted to continue using the site to trade out of, as the business is turning a pretty decent profit. He confirmed that they were indeed personally liable for the rent, but the funds would be drawn from the assets of the company.....my experience is chartered accountants don't normally open up their personal pockets and offer to pay anything.

I simply need to make up the invoice and smoke it through to him, he said it would be paid from today.....so we lost only 7 days payment of rent and outgoings.

The trouble with the whole show is it's simply being weighed down by two things ;

1. Interest payments on a loan taken out to buy his ex-partner out.....growing pains going from 50% up to 100% full control.
2. A significant ATO debt from activities 2 or 3 years ago when he was operating out of a smaller non-profitable site.

Given the profitability right now of the operation, and the future prospects of the operation when it's up fully and running with conveyor belts and automation....I'm seriously thinking about taking a slice of the equity.

I'll need to have a chat with the Banker first though. This is a different kettle of fish compared with buying dirt.


On a personal note, my tenant was at the meeting and looked like he'd been dragged through the mire and back again. He was deathly pale / embarrassed to be there and forlorn. At least he was there !!!

I went straight up to him, shook his hand and gave him a "man-hug"....not too close if you know what I mean...and told him it's only money, we'll get through it....he seemed to appreciate that.

Anyway, next meeting is scheduled for the 20th, so I need to make a decision whether to jump in and take equity or not. The business fundamentals are there, everyone needs skip bins and with the reno's and building going on, I can't see a drop off in demand. Also, the infrastructure on the property is surely there. I know that the big boys in the industry would jump all over it in a flash, so maybe a slice of that pie might be good....dunno.

 

[WinstonWolfe]

Seems the business will provide some nice cash flow to service some more property debt. Hope you can get in, after a bit more dd.

What I don't understand is how he wracked up such a large tax bill in the early days when his overheads should have been higher. Sounds like his accountant didn't get his debt equity ratio or tax structure right.

Hats off to you for being big enough to make him feel better Dazz. There aren't too many people that would do that.

Hope the two of you can work something out. Seems the guy needs some financial guidance. WOuld have been smarter to pay his partner out over 3-5 years rather than crash his cash flow with one up front loan.