Gold Coast property developer City Pacific fights for survival after losing control of property fund

Struggling Gold Coast property and finance group City Pacific faces an uncertain future after finally losing control of a key mortgage fund that provided about a third of the company’s income.

On Monday, the Federal Court handed down a decision giving control of City Pacific’s $630 million First Mortgage Fund to rival fund manager Balmain Trilogy.

Today, City Pacific will hand over key documents to Balmain Trilogy, a move which to many signal that the battle for control of the fund is finally over.

While City Pacific representatives were not available for comment at the time of publication, chief executive John Ellis told The Australian that an appeal is unlikely.

“We haven’t made a final determination yet as to an appeal, but handing over those documents is a fairly big move.”

Shares in City Pacific remain suspended. The company says it is in the process of talking with its advisers and will provide an update for the market soon.

City Pacific has $100 million of debt with Commonwealth Bank and is in negotiations to retain the support of that lender.

The loss of the First Mortgage Fund is clearly a bitter blow for the company. According to the company’s accounts for the six months ended 31 December, income from funds management accounted for around 40% of the company’s revenue.

KMPG auditor Paul Steer wrote in the company’s half year accounts that “material uncertainty exists which casts doubt about the group’s ability to continue”.