Mr Baskerville told investors at the creditors’ meeting that preliminary investigations estimated that only 20-30% of investors’ money was actually deployed to buy property.
About 69¢ of every dollar invested appears to be spent on operating expenses and another 11¢ on commissions and risk fees, he said.
The company then had to borrow from lenders at high rates to make up the rest of the money needed to purchase the properties.
“The situation is getting slightly worse,” Mr Baskerville said, pointing out that the company had also lost money on the land it sold.
“As a preliminary, we will say that Remi Capital Group appears insolvent since its inception.
“What we believe is that Remi Capital Group has not purchased a single income-generating asset. We understand that Remi Capital Group has not completed a single real estate project.
Mr Baskerville said the investigation was “a monster”, with his staff “burning midnight oil” and an upcoming creditors’ report expected to reach 600 pages.
The claims made by the administrators are part of the preliminary investigations and The Australian Financial Review does not suggest that they have been proven.
Remi Capital was founded by Peter Terrill as C2 Capital in 2018. He was ousted by the company last year and replaced by former Capital team leader Mark Prestige.
Mr. Baskerville said that even when it was created, the directors’ preliminary investigation indicated that Remi Capital may have only $3 million in equity but $60 million in debt.
The company has raised capital through short-term debt from investors on 12-month loan notes – a “real mismatch” in cash flow for a company dealing with property developments that could take years, said said Mr. Baskerville.
Documents seen by the Financial analysis show that investors were offered 8% interest per annum, paid quarterly, with a 5% maturity rate after 12 months, when investors could repay their debt.
Mr Baskerville said this meant that someone who invested, say, $1 not only needed to get back $1 after 12 months, but also an additional 5%, or $1.20.
“It’s a gap in capital needs, so investor number two has to come in with $1.20 to cover investor number one’s capital gap,” he said.
However, investor number two would also need his 5 percent.
Despite acquiring an Australian financial services license as an authorized representative, Jirsch’s preliminary investigations indicate that Remi Capital failed to perform required audits when raising funds from retail investors.
“I understand there is no appointed auditor. My further understanding is here [are] no audited financial statements,” Mr. Baskerville said.
He said Mr Prestige claimed to have caused the company to submit numerous tax returns and financial statements when he replaced Mr Terrill as sole director.
Over the five years of its operation, $84 million has been raised under Mr. Terrill’s leadership and $45 million under Mr. Prestige’s leadership.
“Real fears for his safety”
Mr. Prestige provided a statement to the meeting of creditors expressing his “deepest regret for the way Remi and you personally came here today”.
He said he was recruited by Mr. Terrill to C2 Capital in 2018 as head of the capital team and took on the role of sole director last year in a bid to turn the companies around.
He said he succeeded in significantly reducing cash burn and updating tax and financial reporting requirements.
“I think Remi was going in the right direction,” he said. “I work closely with the directors to craft a deed of partnership arrangement that is workable.”
Mr Baskerville said Mr Prestige, while present online at the creditors’ meeting, was not present in person because “he had indicated to me that he had genuine fears for his safety”.
He said Mr Prestige had been “very compliant” and had provided access to accounting records.
However, he warned that if the company were liquidated, action could be taken against the directors to recover the funds.
He said the company would “shake all the trees to see where the money was going” and had already hired lawyers.
Mr. Terrill did not return requests for comment.