PIR defends Westpoint ratings
Property Investment Research (PIR) has defended criticisms made by the Shadow Minister for Financial Services Nick Sherry at a recent Senate Estimates hearing regarding a rating it issued on a Westpoint product.
“[PIR] refers to significant delays . . . on two of Westpoint’s property development projects. It notes that Westpoint is in litigation ... and that there is a lack of availability of audited financial statements ... and yet the independent house gave it three out of five,” Sherry told the committee.
But according to PIR managing director Richard Cruickshank, Sherry has confused a number of research reports issued by PIR relating to both regulated and unregulated mezzanine offers.
He said: “In 2000-01 we rated four of the mezzanine offers and then three other mezzanine offers failed to meet our most stringent tests to make investment grade.
“Following that, we provided a rating for a regulated investment offer under the MIA that was completely different in nature to the unregulated mezzanine offers.
“That offer was rated a three out of a possible five stars and, other than the receivership of the responsible entity, there is still no evidence that would not support this rating under a separate management team and structure.”
According to Cruickshank, many advisers rolled over client investments following maturity without obtaining additional information.
He explained: “We assessed them on pretty low loan to value ratios and clearly pointed out the development risks of those developments, but since that particular date those investments have matured, they have rolled over without investors or advisers demanding any research from PIR.
“Had the investors demanded that research, it’s possible that we could have detected that they had raised well in excess of the original amount and that the risk had blown out dramatically.”
Sherry also remarked that PIR had been paid “substantially above what would normally be expected” by Westpoint for its research. According to Cruickshank, PIR fees range from between $10,000 and $30,000. He said: “The average is $15,000, and PIR was paid a fee of $11,000 for all mezzanine debt offers.”
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