daz - let us know what the eventual outcome is. i'd really like to hear that the guy is allowed to trade out of his debt, but just generally interested whatever happens.
OK, for those mildly interested.....it's been a while but the situation has progressed a little since last I posted.
The second meeting of creditors which was supposed to decide the fate of the company going under took place on 20 July. There were minimal people attending....myself representing the Landlord owed 10K, a casual secretary who was owed $ 350, a truck hydraulic repairer who was owed 36K and a representative from the ATO owed 212K. That was it....just enough to form a quorum.
With all of the 'big' players not present, I could see they were just going to adjourn the meeting to a later date. The backroom deals were already well in place and none of us at the meeting were involved.....great !!!
By law, they could only adjourn the meeting once, and only for a maximum of 60 days, out to the 20 of September. The ATO reminded them that they had a court action to wind the company up on the 8th of September.
The meeting was therefore adjourned to the 21st of August.
At this stage we were down to only three options ;
1. Submit a DOCA (Deed of Company Arrangement).
2. Put the company into liquidation.
3. Give the control back to the company directors and return to normal.
DOCA was finally submitted by a larger player in the industry, absorbing the vehicles and some of the employees. My tenant was offered a site manager's job in the larger operation
at a different site. He's good with trucks and drivers, but hopeless on the financial side of things. They offered just enough to get the figure above the liquidation figure. Return of 20c in the dollar to all creditors.
Liquidation was by far the most attractive option to me, as the Lease would be cancelled and I'd be legally free to negotiate a new Lease, or indeed develop the site.....or whatever the hell I wanted to do with it. Return of 11c in the dollar to all creditors. I personally didn't care about the return in the dollar figure, It was peanuts for us. What I was concerned about was getting the exisitng Lease torn up and control of the site returned to me. All the accountants were concerned about was return in the dollar.
Company was trading at a loss, therefore option 3 would immediately deliver it into the hands of the ATO and the court. Not viable from their perspective.
We have been receiving full rent and outgoing payments for the months of July and August from the chartered accountants, so that's been good.
I didn't care about the pitifully low return on the debt owed, that is the least of my concerns. I just need control of the site back....and it to be clear and clean. There's about 70 semi trailer loads (about 2000 tonnes) of sand / rubble / plastic / asbestos / and other people's rubbish currently on the property.
Just returned from a meeting with the Owner of the new business who is taking over control and he wanted, as part of the DOCA, to close down the operations on our site and remove everything to his site. Woohoo !!!
We agreed on a handover time of October 15 when I would go out there and inspect that it is clear and clean. He agreed to pay the rent and outgoings on the property for the full 6 weeks whilst he mops everything up.
I thought I was in the clear and ready to Lease the site out again to this new organisation I'd been negotiating with. I wrote up the Lease and sent it off to him last month. Terms were as such ;
Nett rent.............$ 145 K p.a.
Outgoings............Paid by tenant (CR / WR / LT / Ins / PM fees)
Bond...................$ 160K (12 months gross rent...in my name, not some Govt bond agency).
Rent escalations...Alternating between 5% p.a. and market (to capture 20 and 30% jumps).
Term Length........10 years
Looks nothing like a residential lease, but there ya go. We aren't hampered by 3% wage rises.
As it turned out, they no longer want to lease the site, so it's back to square one in terms of finding a new tenant. At least the Lease is fully written up and we'll have control of the site once again. We've also got about 6 to 8 weeks to find someone before we start dipping into the excess rent paid pot, so in this hot rental market we are reasonably confident someone will be found under those terms.
So, at the end of the day, this is what the picture looks like for us ;
A vastly improved property (see initial post)
The prospect of a clean site by mid October
Enough excess cash from the rents to pay the mortgage 'til July next year
The opportunity to do what we want with the property (Lease out / develop)
Had an offer of 3.1 MM to buy the place from the neighbour which was rejected
The tenant's business shall be absorbed into the larger operation, and he personally is still up to his eyeballs in debt, unlikely to crawl out from that position anytime in the next 10 or 15 years.
ATO is left collecting 42K, the other 170K owed to taxpayers is lost. This ain't good in my opinion.
The largest creditor (his former partner) collects 193K out of his 965K and loses 772K. He's the biggest loser in all of this.
When analysed in the cold light of day, I think we have come out of the wash in reasonably good shape.
The clear winners in all of this were the chartered accountants appointed to do the administration. Almost every second motion at every meeting was to approve their 100% of their fees prior to any other monies being dispersed to creditors. They certainly don't miss out - they're at the front of the queue.
They charged fees of 50K per month to my tenant's company, which effectively reduced the payout from 45c in the dollar down to 20c. When I confronted them about it, (no-one else thought it unreasonable that junior filing clerks and undergraduates charged out at $ 110 per hour), they had a smirk on their faces and the top dog's response was "We have reasonably high overheads that you would understand, our rental premises cost alot". My reply was "I hope you see the delicious irony of what you just said."
My overall opinion on the whole process is that many people get trampled in this rush for everyone who are supposed to be responsible to avoid as much liability as possible, and the good honest business folks, including employees, get thrown out the window as soon as the solicitors and accountants move in.
Anyway, it's not over yet, another 8 weeks of fully paid rent and outgoings to go...not too bad, but I can see a small glimmer at the end of the tunnel.
