Land banking schemes—old and new
Investment in property is a long established and accepted strategy for
Australians to build wealth. Land banking is a particular category of property investment,
and can take many forms: an individual entrepreneur who purchases a block of
land for future sale, a land banking company that buys land and divides it into
smaller plots to sell to investors or a company that holds the land or property
as a collective investment on behalf of the investors. In this chapter, the
committee provides insight into the nature of land banking schemes,
particularly the 'innovative' use of options agreements to fund housing
developments. It undertakes a detailed analysis of the way land banking schemes
are promoted to investors with a particular emphasis on two companies involved
in land banking schemes, 21st Century Group and Market First. The
committee also considers matters dealing with transparency and disclosure in
the marketing of these products.
Land banking is a speculative venture whereby an investor purchases a
block of undeveloped or underdeveloped land in the expectation of selling it in
the future when its value has increased significantly. Ideally, the investor will
wait until market conditions are favourable and then divide the block into
smaller sections or into house and land parcels to sell at a profit. While
often heralded as a smart way to increase wealth, this type of investment exposes
the investor to the risk of losing significant amounts of money. For example, the
areas chosen for land banking are often located on the outskirts of cities in
the hope that urban development will over time boost the value of the land.
Permission, however, may not be granted for the anticipated development and the
investor is left with a plot that remains under restrictions and is unlikely to
increase in value. There is also potential for the promoters of such schemes to
entice investors to sign up to deals without alerting the investor to the
inherent risks of land banking in general or their particular land banking
Options to purchase
In contrast to a number of 'get‑rich‑quick' schemes which
have been promoted (and attracted the attention of regulators) in the past,
land banking schemes have been described as a 'get‑rich‑slow'
scheme. This is because of the long time frame between the contract being
signed and the payment of the option fee or a deposit for an off-the-plan
contract of sale.
Much of the committee's attention during the inquiry was focused on a
land banking scheme that has unique features and is a relatively new type of
investment scheme promoted by property spruikers—options to purchase.
The use of options agreements as an investment strategy is the 'innovation'
which distinguishes these land banking schemes from previous property
investment schemes. Mr Simon Cohen, Director of Consumer Affairs Victoria,
described this type of arrangement as:
...distinct from rent-to-buy or vendor terms contracts in that
the contract a buyer enters may only be an option at some future point to
purchase a plot of land subject to development approval.
In other words, 'rather than getting an interest in the property per se,
there is an option that may be exercisable at some future point after
registration of a concept that is marketed to someone'.
With the schemes using options, investors typically enter a contract that
provides them with an option, but not an obligation, to purchase a plot of land
subject to development approval. They pay a fee for the option at the outset. ASIC
provided some general background on land banking schemes before explaining the
more recent 'option' model:
Land banking is a real estate investment scheme involving the
acquisition of large blocks of land by a promoter or developer of the scheme,
often in undeveloped rural areas, who then offer portions of the land to
Land banking companies typically promote the investment with
representations of high potential returns if the land is redeveloped, or if
plans for rezoning and development are finalised.
Investors either purchase a lot in the land, or acquire an
option to purchase a lot of land in an unregistered plan of subdivision. The
option agreement is triggered at a time that the necessary development is
approved by the local council.
According to media reports, options were commonly marketed as an
affordable way to get a foothold in the property market, with substantial
returns on the investment promised once the land was rezoned for residential
development and converted into housing estates to meet future housing demand. The
attraction for investors was that they would only need to outlay a small sum of
money for the option fee and would later benefit from any appreciation in the
value of the land once the land was developed.
Companies involved in recent land
The two companies involved in promoting the land banking schemes of particular
interest to this committee are the 21st Century Group, operated
by Mr Jamie McIntyre, and Market First, run by Mr Rowan Burn.
It should be noted that both companies are being investigated by ASIC for their
role in operating and promoting land banking schemes.
The committee notes that there may be other companies involved in operating and
promoting land banking, including schemes offering options.
In relation to the 21st Century Group and Market First land
banking schemes, ASIC estimated that approximately 2,000 investors purchased
either options or off-the-plan contracts of sale.
Many investors, however, purchased multiple lots so the money invested is
likely to be in the high tens of millions, if not more.
The 21st Century Group
In October 2015, Midland HWY Pty Ltd, the developer of a land banking
scheme which was established on 7 September 2011, commenced selling option
deeds and off-the-plan land sale contracts for parcels of land lots on the
outskirts of Huntley near Bendigo, Victoria. The 21st Century Group marketed
this development known as Hermitage Bendigo (formerly Acacia Banks) located at
Midland Highway, Bagshot, Victoria.
To protect the interests of investors, ASIC commenced proceedings in the
Federal Court of Australia (Victoria) to freeze assets and wind up this
development. Based on preliminary investigations, the administrators prepared a
supplementary report to creditors, dated 14 October 2015, noting there were many
issues concerning the Midland project that required further investigation by a
liquidator. The administrators reported that Midland had spent the entire
proceeds of the option fees and was without funds to repay the c$24m Option
Fees. It provided the following details:
Midland received c$24m from Option Holders and has spent those
funds without completing its obligations under the Option Deeds.
Only c$1.7m of the c$24m appears to have been applied
specifically for planning permit and development purposes.
Up to c$22.3m of payments from Midland's bank accounts have been
identified as likely to be voidable transactions or other potential claims
which should be investigated by a liquidator:
c$7.6m—in payments unrelated to the development of the land,
including $7.2m to companies associated with Midland's lawyers;
c$2m—paid for which Midland appears not to have received any
c$11.9m—for potential payments at 'above market rates',
$7.3m—commission paid out of Option Holder payment proceeds;
$4.6m—fees paid to Project Management (AUST) Pty Ltd (PMA), whose
sole director and shareholder appears to be a Midland shadow director/de facto
c$761k—miscellaneous payments requiring further investigation.
PPB Advisory partner, Mr Nicholas Martin, advised creditors that:
This is a very unfortunate situation for Midland Hwy
investors, as our preliminary investigations have revealed that of the $24
million invested in the scheme, just $1.7 million has been spent on the
planning and development of the project. While all option fees also appear to
have been spent, the majority have not been applied to activities relating to
the development of the land.
The administrators were unsure whether the land owner, Bilkurra
Investments Pty Ltd, had sufficient financial resources to complete the land
On 7 December 2015, the Federal Court of Australia made wind-up orders
for the company.
As part of its wider investigation into land banking schemes, ASIC also launched
proceedings in the Federal Court of Australia against companies associated with
Mr McIntyre and the 21st Century Group in relation to their promotion and sale
of interests to investors in five land banking schemes. ASIC alleges that the
schemes are unregistered managed investment schemes and that the 21st Century
Group companies and Mr McIntyre have been unlawfully carrying on an unlicensed
financial services business. The five schemes were promoted and advertised as:
Botanica, located at 805 Archer Rd, Kialla, Victoria (an area of
the previously named Moira Park Green City development outside of Shepparton);
Secret Valley Estate, located at 955 Old Sydney Road, Bylands,
Oak Valley Lakes Estate & Resort, located at 124 Booth Road,
Brookhill, Townsville, Queensland;
Bendigo Vineyard Estate & Resort, located at 51 Andrews Road,
Bendigo, Victoria; and
Melbourne Grove Estate, located at 1491 Dohertys Road, Mount
Over the course of the court proceedings against 21st Century
Group, ASIC became increasingly concerned about the prospects of 21st
Century Group's land banking schemes, informing the committee that:
ASIC's view is that it is unlikely that options investors in
the 21st Century land banking schemes will be able to see their return on their
investment or receive a refund of their option fee given that the developments
do not appear to be capable of being completed because:
relevant councils have stated that the underlying land in each development will
not be, or is highly unlikely to be, rezoned as residential land for the
underlying land in each development is either:
- not yet owned by the 21st
Century Group; and/or
- financed by way of
- at present, there appears to be insufficient funds
the money paid by investors if the developments cannot be completed; and/or
money, whether in respect of any debt, by way of damages or compensation or
otherwise, or to account for financial products or otherwise, to investors.
Mr McIntyre, CEO of 21st Century Group, described his land
banking schemes as a 'new strategy' that his company started selling four or
five years ago.
It has been reported that a Shepparton property developer, Mr Nejat Mackali,
was the original creator of options agreements, which he used as an innovative
method of funding the Moira Park Green City development outside of Shepparton,
Mr Mackali alleges that the 21st Century Group, which marketed
the Moira Park Green City development, later used his options strategy as the
funding model for other land banking schemes.
As noted in the previous chapter, Mr McIntyre appeared before committee in
public to give evidence relating to his involvement in land banking schemes.
While Mr Mackali corresponded with the committee, he declined an invitation to
give evidence at a public hearing.
Market First was the promoter of Foscari, located in Truganina,
Victoria. Foscari was touted as having its own aura and a unique combination of
attractions, 'wonderful in design, inspired by some of the world's most
prestigious and luxury resorts'. Said to be located in one of Melbourne's
hottest growth corridors, Foscari offered:
...an exclusive collection of individually designed luxury residences
brought to you by internationally acclaimed Elevli Plus Peddle Thorp
According to Market First's advertisements, the development had approval
from the Council and 'millions of dollars of earthworks have already been done
in preparation for the construction of the project'. Further:
The Developers are putting heart, soul—and lots of money!—into
making this a landmark development. That's why I have no doubt it will win many
awards for its ground-breaking design and amenities.
All of which will help to increase the potential returns of
those Market First Members who wisely invested.
On 21 December 2015, the Federal Court made freezing orders against
Foscari Holdings with respect to selling, charging, mortgaging or otherwise
dealing with or disposing of any property of Foscari Holdings until the hearing
and determination of the proceeding or further order of the court. The court
also ordered that Foscari Holdings be restrained from completing contracts of
sale relating to Foscari (unless the prior written consent of ASIC was
It should be noted that some investors in Market First's schemes did not
invest through options: instead, they invested through a more traditional
property investment route, by paying a deposit for an off-the-plan contract of
sale. For example, of the 197 Slater and Gordon clients who invested in
Market First's schemes, 156 were off-the-plan contracts and the remaining 41
had purchased options.
Burn at one of Market First's sites outside of Melbourne, which would
apparently be transformed into a luxury housing development
There are more protections under state and territory laws around
property transactions for off-the-plan contracts of sale, and these investors
may stand a better chance of getting their deposit returned as it should have
been held in trust. Whether off-the-plan investors will actually receive their
deposit back is yet to be seen. Even so, ASIC was concerned that the development
company was insolvent and that it was 'just and equitable' that the company be
wound up. ASIC's investigations suggested that:
...investors may have invested in the land banking schemes on
the basis of misleading representations and that option agreements entered into
by investors in Hermitage and Foscari purportedly allow for monies invested in
the schemes to be used for any purpose whatsoever, and need not be used to
progress the two land banking schemes.
ASIC was concerned that Foscari was not close to completion and appeared
to be incapable of completion due to the financial position of the development
After an initial investigation, sparked by an awareness that one of its
lawyers was providing advice on the schemes, Slater and Gordon Lawyers also became
concerned about a number of matters related to the Foscari development and another
one called Veneziane. Many of these concerns raised questions which remain
unanswered, particularly around the opaque ownership of the developments.
Ms Sharon Taylor, Slater and Gordon Lawyers, informed the committee that her
firm had concerns about a number of misleading presale representations made to
investors, including representations made about the price of the investments:
We were particularly concerned about the idea that they were
wholesale prices. Our investigations indicated they were not.
There was also the idea that people were paying for some sort
of exclusive membership to give them the opportunity to look at hand-picked projects,
and it appeared only two projects were on offer.
Some of the more extravagant lifestyle amenities were thought
unlikely to be delivered. The bare registration of the plans of subdivision was
considered to be possible, if the projects received Council approval. We were
sceptical and put a number of specific questions on this issue to the vendor's
solicitors [Evans Ellis Lawyers] in our letter dated 12 December 2013
to which they responded by a letter dated 19 December 2013.
Mr Rowan Burn, CEO of 21st Century, declined the committee's
request to appear as a witness to answer questions relating to the operation of
these land banking schemes. He informed the committee that he was currently
using his time and energy contacting clients 'to ensure they have all the
information they need'. According to Mr Burn, his focus was 'on having
private discussions with option holders and off the plan buyers', who were also
free to contact him 'to discuss their own circumstances as they always have
been'. He was of the view that he could not provide 'any meaningful information'
that would assist the committee's inquiry.
The committee takes a very different view. People with inside knowledge
of those particular property schemes hold information vital to understanding
the ventures and should do their utmost to impart such knowledge, especially
where the interests of retail investors may be in jeopardy. Their reluctance to
do so merely adds to the uncertainty and doubts around the credibility of the
schemes and their promoters.
Concerns about property investment schemes are not new, and there is
some evidence that part of the problem associated with such schemes can be
attributed to 'rogue traders' often with links to shady operators from the past.
A number of people who were involved in property investment scams in the
early 2000s (during the last property boom) are also allegedly involved in
the schemes promoted by Market First and 21st Century Group,
including notorious rogue trader Mr Henry Kaye and his sister Ms Julia Feldman.
Mr McIntyre denied Mr Kaye had ever worked with 21st Century
Group, and told the committee that Ms Feldman had not worked for the group for
around 18 months.
Prior to this time, Ms Feldman worked for 21st Century Group as a
sales manager and trainer.
Ms Feldman reportedly held similar roles in Market First, and is one of many
people linked to both Market First and 21st Century Group.
The leadership and ownership structures around the less reputable land
banking schemes are often opaque, so it is difficult to determine who is
involved (often behind‑the‑scenes) in the companies that develop or
promote the schemes. There are also other parties involved in the operation of
the schemes: developers, project managers and land owners. The Midland HWY
development provides a recent example of this opacity and the murkiness that
surrounds the identity of controlling and related entities.
Midland Hwy development—Hermitage Bendigo
The difficulty determining the parties involved in operating a land
banking scheme can be illustrated through the Hermitage Bendigo land banking
As previously noted, the developer of the project was Midland HWY Pty Ltd
(Midland Hwy). The 21st Century Group was the principal marketer of
Hermitage Bendigo. Mr McIntyre acknowledged that 21st Century
Group had marketed around $16 million of the approximately $25 million
invested in the project.
As noted earlier, Midland Hwy was placed into voluntary administration
on 2 July 2015 and, following proceedings in the Federal Court commenced
by ASIC, officers from PPB Advisory were appointed administrators.
Subsequently, on 7 December 2015, the Federal Court ordered the
winding up of Midland Hwy and appointed PPB Advisory as liquidators.
The principal reasons for the court's determination were:
Midland was insolvent—it had little in the way of assets but had
substantial liabilities to the retail investors and third parties. Midland was
not operating a business and appeared to be a shell.
Midland had been used for shadowy purposes—substantial
transactions and money flows involving Midland ranging from $22.3 million to
$24 million required full investigation more appropriately carried out by a
liquidator rather than by ASIC.
Bilkurra Investments Pty Ltd, the proponent of the Deed of Company
Arrangement (DOCA), was substantially implicated in the transactions that in the
court's view required full investigation, as were the persons and entities
The proposal propounded by Bilkurra to the creditors of Midland
was embryonic and Bilkurra's capacity to implement the same was doubtful—indeed,
according to the court, Bilkurra's own financial state was 'dubious to say the
It was doubtful whether the creditors of Midland who were the
retail investors and option holders would receive any substantial benefit from
the DOCA and, further, misleading representations were made to such creditors
prior to their vote on the relevant resolution in order to procure their vote.
Generally, it was in the public interest that the administration
of Midland come to an end and that Midland be wound up.
PPB Advisory, as the liquidator, is continuing to investigate the
affairs of Midland Hwy and to determine whether any money can be recovered for
creditors. However, as noted above, some concerning details have already been
uncovered. In a supplementary report to creditors, PPB Advisory reported that $24 million
had been paid in options fees and around $1.15 million had been paid under
off-the-plan land sale contracts (with bank guarantees totalling a further
$433,000 in lieu of payments).
PPB Advisory reported that Midland Hwy had spent the $24 million in option fees
without completing its obligations under the option deeds, and only $1.7 million
of the money invested appeared to have been spent for planning permit and
Evans Ellis Lawyers, who are linked with many different land banking
schemes operated and promoted by both Market First and 21st Century
Group, are acting as solicitors for both Midland Hwy and the company which owns
the land, Bilkurra Investments Pty Ltd (Bilkurra). Evans Ellis Lawyers has
refused to identify the individuals providing instructions to them on Bilkurra's
behalf, and PPB Advisory suspects that someone other than the director of
Bilkurra is providing instructions.
It should be noted that on numerous occasions the court referred to
shady deals, and also noted the complex web of entities and transactions
involving Midland. The court described Midland as a corporation that 'has been
used and controlled by shadowy figures and entities'. Mr Michael Grochowski,
according to the court, 'appears to have been the de facto or shadow director
and the real controller of Midland' and also controlled PMA, which was
appointed project manager for Midland in December 2011.
The committee asked Mr McIntyre about reports that the project manager
for Hermitage Bendigo, PMA, received a significant amount of money from the
options fees. PMA was appointed as project manager for Midland Hwy in December
2011 and no other project manager was appointed subsequent to this date.
Mr McIntyre informed the committee that he had no knowledge of, or links to,
Instead, Mr McIntyre told the committee 'all we had heard of was Midland
and the project manager'.
Further, Mr McIntyre distanced himself from the operation of Hermitage Bendigo:
'[w]e were the marketer of this project. I know others would like to make
allegations that somehow we are the developer, but we are not'.
It is unclear how Mr McIntyre knew of a project manager but did not know
of PMA itself.
In addition, media reports linked Mr Henry Kaye to Hermitage Bendigo
through the involvement of a number of Mr Kaye's associates.
Mr McIntyre maintained that 21st Century Group had 'never
knowingly marketed his [Mr Kaye's] land projects'.
From Mr McIntyre's perspective:
There was speculation made around the Midland project, but we
could never verify that. We ceased marketing anyhow, but I can tell you that
the board at 21st Century would never have approved or signed off on
marketing a Henry Kaye project.
It would seem, based on Mr McIntyre's evidence, that it can be difficult
even for the companies who promote and sell the majority of lots in certain
land banking scheme to determine who is involved in the operation of land
banking schemes. The court concluded:
Midland received $24 million from retail investors to be used
ultimately for the purchase and development of the land. The $24 million is
missing ...Yet Bilkurra has the land, and other entities and individuals have
received and had the benefit of most of the $24 million. Midland now has
nothing. The investors have nothing. All of this demands a proper investigation
by a liquidator and appropriate recovery proceedings.
Foscari Holdings Pty Ltd
As noted earlier, ASIC had concerns about Foscari Holdings Pty Ltd. The
administrators, PPB Advisory, also identified a link between the 21st Century
Group marketed Hermitage Bendigo project and Market First's Foscari project in
Truganina, on the outskirts of Melbourne. Midland Hwy paid $4.768 million to
a holding company, Foscari Holdings Pty Ltd (Foscari Holdings).
There was no documentation or explanation for the payments.
Foscari Holdings appears to be owned by Evans Ellis Lawyers (who are also
acting as solicitors for Midland Hwy and Bilkurra) through holding companies,
and the identities of the beneficial owners of the holding companies are
As noted in the previous chapter, the committee attempted to contact but
received no response from Mr Darren Eliau, the principal lawyer at Evans Ellis
Lawyers, and thus did not have an opportunity to seek further information on
The approaches taken by 21st Century Group and
Market First to promoting options as a property investment strategy, and the
financial links and business connections between the two organisations raise
serious questions about whether the same (unknown) interests are behind most,
if not all, of the land banking schemes that are currently raising concerns.
Options to purchase land are a complex product and potential investors
should be properly informed about the proposal being offered to them. Evidence
received by the committee, however, demonstrated that many investors were
unaware of the risks and disadvantages of investing through option agreements.
Instead, some investors thought that they were purchasing an interest in the
land itself. The committee received as evidence DVD recordings of sessions from
investment seminars where spruikers from both 21st Century
Group and Market First promoted their respective land banking schemes.
It should be noted that ASIC informed the committee that there were no
off-the-plan investors in land banking schemes subject to the 21st Century
Neither seminar fully explained the nature of options and the interest that
investors who paid the option fee would actually be receiving.
During the course of the inquiry, the committee heard evidence from four
investors in land banking projects: Ms Grazyna Monka, who invested through 21st Century
Group, and Mr Jim Guy, Ms Liesl Baxter and Mr Trevor Haynes, who
invested through Market First. Only one of the four investors, Ms Monka, was
aware that the investment involved options.
The three Market First investors had never heard of options agreements before;
it is possible that they all had invested through off-the-plan contracts of
Indeed, Mr Guy later provided a submission which indicated he had invested
through an off-the-plan contract of sale.
In his submission, Mr McIntyre provided copies of correspondence
allegedly from investors in 21st Century Group's projects to ASIC
and/or 21st Century Group.
The investors were supportive of 21st Century Group and generally
expressed the view that ASIC should discontinue its court proceedings if 21st
Century Group provides investors with refunds or converts the options
agreements into a managed investment scheme. Some investors made the point that
they conducted ample due diligence on their options investment. They were under
the impression, however, that they were making an investment into real property.
For example, one investor contended:
My husband and I purchased an option in December last year in
our SMSF after doing complete due diligence, going to the office to discuss the
project and visiting the site.
If 21st Century has done the wrong thing by not
'registering' as an financial investment company (I thought we were
investing in land, not a financial product) would it be possible for you
[ASIC] to point out their mistake and assign them the correct paperwork you require
so all the investors involved aren't taken to the wall?
In contrast to the lack of clarity in the marketing of the schemes, Mr
McIntyre outlined for the committee the non-refundable and non-property nature
of options, illustrated with an example from his own personal experience:
What is important to note about land banking and options?
Option is a fee for service. Once you have bought an option, that is it. You
have the right but not the obligation to use the option to acquire land in the
future. There is a simple example. On one of my farms, three years ago, I sold
an option to a mining company. They paid me $90,000 for a three-year option.
Once the mining companies pay that money it is mine to keep, regardless of
whether they choose to exercise their option. They are not obligated to but
they cannot change their mind and ask for feedback or question where the money
is. It is none of their business. They bought a non-refundable product.
In his submission to the inquiry, Mr McIntyre reiterated the point that
once an investor pays for an option they cannot change their mind and get the
fee back or even question where the money is as it is 'none of their business'.
He did note, however, that 21st Century was offering 'a 100% money
back option if the project wasn't approved in 20 years' time.
While Mr McIntyre is adamant that investors cannot change their mind
about their investment, or, in his words, 'question where the money is', the
fact that investors in these schemes are repeatedly asking those same questions
points to a fundamental misunderstanding about the nature of the investment
they were making.
The (potential) benefits of holding an option to purchase land differ
significantly from the benefits of purchasing an interest in investment
property. If the land received development approval and the option were, in
effect, triggered, investors would then have the option to purchase the land or
resell the option to another investor. To purchase the land (and a housing
package to develop the land into residential housing) would require either a
significant amount of money or access to credit. It is unclear how many
investors would have been in a position to purchase and develop the land if the
option were activated (that is, to take advantage of the benefit the option
supposedly gave them). For example, Dr Elizabeth Lanyon from
Consumer Affairs Victoria noted that the promoters of land banking
schemes often targeted consumers who have limited access to mainstream finance.
One investor who spoke to the committee was already bankrupt when he purchased
the options, and it appears unlikely that investors in such circumstances would
have been able to purchase and develop the land if their options were
This is unsurprising given the land banking schemes appear to have been promoted
to people who were looking for a more affordable way to purchase property.
The other approach, to resell the option to another investor, might be
possible, assuming the option was actually triggered and the land had some
value which would appeal to another purchaser. Prior to the option being
triggered at some future point, the option has limited (if any) value as there
appears to be no secondary market in which to sell the option. ASIC described
the option as an illiquid investment as there 'is no market for it'.
For investors who erroneously thought that they were purchasing an
interest in land, the complexities around the use of options were unlikely to
have been considered when making decisions about the value and utility of
investing in a land banking scheme.
Timeframe for development approval and construction
There was conflicting evidence before the committee about the likely timeframe
for land banking schemes to be rezoned and receive development approval. This
timeframe is central to land banking because only when the development approval
is received are the options to purchase land triggered; as discussed earlier,
options have limited (if any) value before they are activated.
Mr McIntyre advised the committee that land banking is a '10- or 20-year
strategy' and that it would be 'absurd' for people to have made money in two,
three or four years' time after purchasing an option.
When asked by the committee if 21st Century Group informed
investors in the Moira Park Green City development, which entered into
administration in 2012, that the land was not part of any future development
plans, Mr McIntyre stated:
Absolutely. They bought a 10-to-15-year option because they
know it could be 10, 15 or 20 years before it is developed.
When we acquired it—which was only 2013—we told them that
this could be a 10-, 15- or 20-year plan. We do not expect the council to
approve it within 10 years, and that is exactly what the council told us.
Remember that this is a long-term strategy. They are buying an option; the
longer it takes, the better off the option holder is. This is not like buying
an option and waiting two or three years—there is no capital growth in that
period. It is a 10- or 20-year strategy; that is what land banking is!
In 2012, with the aim of achieving financial security in her retirement,
Ms Monka, when in her early 50s, purchased two options in the Moira Park Green City development through the 21st Century
As noted above, this development has since fallen into administration.
Some investors in Market First's land banking schemes, including
Foscari, were under a similar misapprehension about the timeframe. A glossy
Market First marketing brochure promises:
You can delay settle[ment] for up to 3–7 years: This means
you can secure your property now, then pay nothing more for up to 3–7 years. So
you get any and all of the capital growth over this time, with a relatively
small amount of money down. 
Investors told the committee that Market First made representations at investment
seminars indicating that the projects would receive development approval and be
constructed in the short- to medium-term. For example, Mr Jim Guy told the
We were told that it would be up to three years before the
property would be developed and we could rent it out. Also, we were led to
believe that there was a 10-year rental guarantee at the end of it. The only
mention of an option to me later on was when we paid a deposit on the building
of this particular thing, and it was only later, a few weeks ago, that I rang
the lawyer who has our money and we found out that it has a six-year term in
the contract that we had never even picked up on and no-one advised us of. So
it is a six-year plan.
The circumstances are further complicated by Market First's attempts to
convince investors that the land banking schemes they had invested in had
received development approval, and additional money was required to proceed
towards the construction phrase. Mr Guy recounted for the committee how he was
approached by Market First to make an additional investment:
Eventually, in 2014, Market First rang me and said that we
needed to consider taking an option on the building. The option was not
mentioned on the land, but on the building it was. We were to pay $43,000 for
that option. I said that we could not do that because I was a bankrupt at the
Later, Mr Guy contacted Mr Burn to receive an update on the project's
development. Mr Guy told the committee that Mr Burn said 'that it was all
developing nicely and we would start developing by late last year , but
nothing has happened since I went there in February'.
In December 2014, Mr Guy received an email from Market First stating that
development approval had been received for the Foscari development, on the
outskirts of Melbourne, and that construction would commence in mid-2015.
In February 2015, Mr Guy visited the site of the Foscari development and
discovered it was still farmland.
Construction has not yet commenced on this development. Mr Haynes, who also
invested in Market First's Foscari project, told the committee a similar story
about being approached for additional investment money:
I did not put more money in, because much later on, when I
thought things were not going very well, I got feverish calls from Market First
representative Alex Baker. I had to put in $40,000 quick smart because the
building was ready, the roads had been done in the area and were waiting for
drainage and it was not long before the development was to start. I took a step
back and thought, 'If he wants my money so badly, there must be a problem,
because there's been no hurried rush to date.' So I did not take that option
for the $40,000 deposit.
One investor, whose name is withheld from publication, provided the
committee with correspondence they received from Market First which provides further
evidence of Market First's requests for additional investment money. One email
(dated 26 May 2014) from Market First informed the investor that builders (Creation
Homes) had been appointed to the Foscari project and a house could be built on the
lot for $322,000; a detailed glossy brochure and a rental appraisal were
attached to the email.
Despite the many promises to different investors that the development was
progressing to the construction phase, the Foscari development is still
The problems associated with land banking schemes have become more
apparent as investors raise concerns when property development milestones are missed
and the land remains undeveloped.
Worried investors, who want to discuss their concerns, have reportedly had
trouble finding anyone in the companies that promoted and sold the options and
Investors were promised luxury housing estates with architect designed
homes, helipads, walking paths and BBQ areas that were detailed in innovative
conceptual drawings and marketing material. However, none of the land banking
schemes discussed in this report has been developed into residential housing
developments. Many sites are still farmland, while some, such as Market First's
Foscari development, have had limited earthmoving work done so that they now
have a few mounds of rubble.
As discussed earlier, there is disagreement between the investors and
operators/promoters of these schemes as to the timeline for development. Many
investors believe that construction should have already commenced on their
development, if not already been completed, and have received regular updates
from Market First and 21st Century Group promising that rezoning and
construction was being progressed. Beyond the lack of physical signs of
progress on the sites, many of the land banking schemes, as noted earlier, are
now in liquidation or subject to court proceedings. For instance:
the Moira Park Green City development, marketed by 21st
Century Group, entered into administration in 2012;
the Hermitage Bendigo project by Midland Hwy, also marketed by 21st Century
Group, is currently in administration;
five projects run by 21st Century Group— Botanica,
Secret Valley Estate, Oak Valley Lakes Estate & Resort, Bendigo Vineyard
Estate & Resort and Melbourne Grove Estate—are currently the subject of
court proceedings initiated by ASIC, and provisional liquidators have been
ASIC is currently investigating matters relating to Market First,
which has marketed the Foscari and Veneziane projects.
Land banking is a speculative venture that poses significant risks even
for the experienced investor. At first glance, land banking as a strategy to
build wealth has appeal. But the marketing of such schemes has the potential to
attract promoters prepared to tout the 'apparent advantages' of land banking to
unwary retail investors, poorly informed about the risks associated with their
investment and unaware of the credentials of those pushing and developing such
schemes. In the following chapter, the committee examines the techniques used
by promoters to sell land banking schemes.
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