In Federal Court documents filed this week, three Chinese participants in the visa program – Jinyi Li, Li Xu and Zheng Xu – have all separately alleged they were prevented from withdrawing the millions they invested with Salter Brothers earlier this year because the funds were “illiquid”.
Citing letters allegedly sent from Salter Brothers, the company told the migrants it had “no obligation” to return their funds, but it was hoping to establish a real estate investment trust by the end of 2023 which might allow them to redeem their investments.
The trio has each alleged they were misled by marketing material for Salter Brothers investments issued by migration agents in the People’s Republic of China that – in Mandarin – claimed the funds were invested in a broad range of assets and were liquid enough to allow redemptions. The separate trust deed was allegedly not translated.
Ms Jinyi invested $5 million in a Salter Brothers term deposit fund in 2016. However, after being encouraged by the company in 2019, Ms Jinyi reinvested her savings into two separate Salter Brothers funds, called Series L and Series K, both of which had a “primary” exposure to the Salter Brothers Hotel Group.
Ms Zheng invested $3 million in the Series K fund in 2016.
Between 2015 and 2016, Ms Li invested $2.5 million into Salter Brothers’ Series E fund, which also has a primary exposure to Salter Brothers Hotel Group and three “development opportunities”.
The Salter Brothers Hotel Group recently booked a $51.5 million after-tax loss in the 2020 financial year after taking a big hit from the temporary closure of its hotels during the pandemic. However, it bought the Travelodge hotel portfolio mid-last year for $620 million, making it the biggest hotel real estate transaction in Australian history.
The Salter Brothers fund owns and operates six hotels, including the flagship five-star Intercontinental Melbourne next to the Rialto Tower on Collins Street, the Voco Gold Coast and Crowne Plazas in Coogee and Melbourne.
Allegations denied
A spokeswoman for Salter Brothers said the company denied the allegations and would be strenuously defending them. However, the group acknowledged the effects of the COVID-19 pandemic on its funds and had created “a proposed liquidity strategy for investors”.
“We have been completely transparent with these clients and met their information requests. Despite a difficult 24 months in the hotel industry due to the COVID pandemic, Salter Brothers is performing strongly.”
It is the latest in a series of headaches for Salter Brothers, which is grappling with multiple legal suits following its purchase of property company Hendry Group in 2019.
Salter Brothers, run by former Macquarie adviser Robert Salter, is suing former chief executive Emma Hendry over claims of millions of dollars in hidden liabilities.
On the other side, Ms Hendry has filed a $1.5 million sexual harassment claim against Mr Salter and his employees Bevan Nicholson and Tineyi Matanda that alleges she was leered at, bullied and stereotyped because of her gender.
Both sides dispute the opposing claims.
Significant investor visas have fallen under scrutiny amid the collapse of property group iProsperity, owned by Michael Gu, which had sourced much of its $130 million from wealthy Chinese investors participating in the visa scheme, probably funnelled through migration agents.
Stockbroking outfit Morgans recently settled a lawsuit brought by a woman who alleged the company had mistakenly slotted investments into non-compliant categories, which scuttled her application to secure a permanent visa in February 2020.
The Australian Financial Review last year revealed Chinese migrants coming to Australia via “golden ticket” investor visas had sought to use gambling wins to meet a $5 million investment threshhold and used fraudulently obtained secondary “passports of convenience” to bolster their applications.
