Ralan OTP buyers offered 15 percent returns in alleged Ponzi style scheme

Some 800 anxious off-the-plan buyers of apartment in incomplete Ralan Group projects didn’t get heartening news when they attended the creditors meeting in Sydney.

The over whelming majority of buyers had allowed their deposits - that ranged from the standard 10 per cent up to 20 percent - to be released to the developer in return for 15 percent interest rates on the funds during the construction phase.

They have a small hope of getting their deposit back although not any time soon amid the $500 million company collapse.

The first creditors’ meeting was not attended by William O’Dwyer, the founder of Ralan who had promoted its projects heavily among the Chinese-speaking community.

It emerged a Sydney law firm has taken up the fight on behalf of the apartment buyers. 

Matthew Bransgrove, who heads up Bransgroves Lawyers, a firm specialising in mortgage lending litigation, was now representing Ralan investors who had released their deposits to the developer as unsecured loans.

"We are currently investigating whether it will be possible to recover the funds through legal action against either the secured creditors or the solicitors who acted for the investors," he indicated.

Bransgrove said the 15 percent interest rate being offered suggested "Ralan was operating a Ponzi scheme (in as much as the money raised from investors was being used to pay interest to other investors)."

"In the absence of a prospectus there was no way for the investors to ascertain or judge the risk involved.

"Ralan required but did not hold a AFSL licence to issue debentures.

"In borrowing the deposits from the investors Ralan was issuing debentures."

There are 1200 apartment buyers in Ralan’s Sydney and Gold Coast apartment towers among the 1800 creditors of the collapsed property developer, according to voluntary administrator Grant Thornton.

The failed developer which entered administration in late July owes at least $500 million to its creditors.

Details of the creditors’ identities shows Queensland’s Hutchinson Builders is owed $5.5m.

Grant Thornton said there were five apartment towers affected by the Ralan collapse.

They are The Orchid at Arncliffe, a long-dormant site near Sydney Airport, along with Ruby Tower 2, Ruby Tower 3, Ruby Tower 4 and Sapphire on the Gold Coast.

Grant Thornton said The Orchid, which fronts 213 Princes Highway, Arncliffe, was the only apartment tower under construction and it was in discussions with the relevant stakeholders.

Lawyer James Feng was at the meeting to represent clients who had bought into the Orchid, the incomplete 318-five tower apartment project, in 2014.

He hoped the buyers would be able to keep their purchase alive as there had been considerable price appreciation.

They had hoped it would be settled by early next year.

Said Jahani at Grant Thornton Australia said the administrators would explore whether future buyer or developers would honour the purchaser’s sale contracts but this remained uncertain.

“Purchasers may receive their deposit back if their funds are still held in a separate trust account,” he said.

One Ralan buyer Shirley Han at Roseville had known of Ralan for more than decade. She resides in a Ralan project at Roseville and has another investment at Warawee.

"They sold like hot cakes," she said.

"I don't think it is a con," she said.

"I am suffering but so too are all the workers at Ralan," she added.

Some of those who attended the meeting were the sales team who had worked for Ralan on commission-only sales contracts for years, and had also invested themselves in the off-the-plan apartments taking their apartments in lieu of regular income.

The NSW state government has indicated it was moving to ensure that off the plan apartment deposits won’t be able to be accessed prematurely by property developers.

New legislation would safeguard deposits within the trust funds of solicitors/conveyancers, estate agents or the public trustee.

The legislation passed parliament last November, but the regulations have been ­delayed and not expected until later this year at the earliest.

This article was first published in the Daily Telegraph.