The corporate regulator has launched an investigation into an investment fund run by the collapsed Presbyterian Church of Queensland that took $26m from investors, including church employees and clergy.
Queensland’s supreme court appointed receivers to the church earlier this month. Guardian Australia has learned the church has debts of about $101m, mostly related to its aged care business, Prescare.
Parishioners say they are worried that selling individual churches and land out from under congregations might be necessary to pay off debts and recover frozen investments.
The church has significant assets, including the heritage-listed Ann Street Presbyterian Church in the heart of the Brisbane CBD.
For decades the church has operated a capital fund to allow it to buy new property, and upgrade and extend buildings. It promises to pay investors annual interest of between 2.75% to 3.75%.
Fine print on a brochure says the fund is intended for investors whose primary purpose is to “support the charitable purposes” of the church “and for whom considerations of profit are not of primary relevance”.
An exemption granted to charitable bodies allowed the church to operate the fund without a financial services licence and allowed it to give less information to investors than other funds are required to.
However, Guardian Australia understands the Australian Securities and Investments Commission is looking into governance issues surrounding the investment fund that include whether the use of this exemption was appropriate.
Asic raised concerns about the existence of the exemption for charities in 2013, but ultimately decided against revoking it.
In a statement, the receivers, PwC partners Michael Owen and Phil Carter, said they were still assessing the state of the fund. In the meantime, all deposits and withdrawals have been frozen.
The fund is notionally for so-called wholesale investors, but accepts smaller deposits from individuals with an association to the church – including clergy, employees and volunteers.
Guardian Australia understands some had put their life savings in the fund. The receivers have told investors it is too early to say whether they will be able to retrieve their money.
The fund’s most recent financial report, from 2019, shows it has more than $26m in deposits at call and only $8.7m in current assets – a “working capital deficiency” of $18m.
“The board is confident the fund is able to continue as a going concern because the fund has had a working capital deficiency for over 20 years,” the 2019 financial report said. “History has proven only a small portion of the liability is called on each year.”
About $11m of money paid into the fund is tied up in a series of loans, including $3.68m loaned to individual church congregations and $5.35m to a church-owned business, Credere Services, which reported $24m in net liabilities in 2019.
Credere is not in administration. However, it is the owner of Contented Chef, which fell into administration in January with debts totalling more than $13m.
When Owen and Carter were appointed receivers of the church, its moderator, Reverend Dr Philip Strong, said: “While our team has worked hard for more than a year to restructure the operations, historical contractual arrangements have made this extremely challenging.”
The church struck a deal with real estate company Catalyst to develop a 100-bed aged care home at Corinda in 2018, followed by another to develop a 140-bed home at Townsville.
Corporate records show that funds managed by Catalyst hold security over both projects.
It is understood that the development deal involved the church selling the projects to Catalyst and then leasing them back.
However, the church is believed to have fallen short on the lease payments. A deal to sell three homes to meet the shortfall reportedly fell through.
Catalyst chief executive Justin Laboo declined to answer questions about the fund’s dealings with the church or the receivership, saying he was “bound by confidentiality”.
The situation has caused significant concern among parishioners, which include a large number from Brisbane’s Korean community.
Of greatest concern is the church’s most prized asset, the Brisbane City Church on Ann Street. The building dates to 1872 and was heavily altered in 1897. The city land has been owned by the congregation since 1854.
Guardian Australia contacted Strong, Prescare chief executive Wayne Knapp and the church office seeking comment. The church referred inquiries to a public relations company, which provided a response from the liquidators.