The Grollos seem to be hanging in there. Oh, to be a fly on the...

The Grollos seem to be hanging in there. Oh, to be a fly on the wall.....

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From HeraldSun
June 28, 2008 12:00am
LONG-suffering investors in Gold Coast financier City Pacific will miss out on a dividend next year with the company writing off up to $35 million in investments gone wrong.

And dividends already due have again been delayed.

City Pacific is to offload property to reduce debt, the company told the stock exchange yesterday.

It also revealed more problems in its $1 billion First Mortgage Fund and its home mortgage business.

The cash-strapped company said it predicted "between $30 million and $35 million net profit after tax" for this financial year - before writedowns and "non-operating profits/losses".

It said that in the coming year it would not make any money from its investment in Martha Cove residential developer CP1 due to "a slowdown in the market and the settlement of sales at Martha Cove".

The writedown is bad news for Grollo family company Grocon, the other major shareholder in CP1.

City Pacific did not say how much it would cut from the book value of its investments in CP1 and another developer, Indigo Pacific Capital.

A writedown to current prices would slash about $35.5 million - all its projected profit - from City Pacific's balance sheet. City Pacific's half-year financial statements, filed in March, valued its 30.6 per cent of CP1 at $39.9 million and its 26.8 per cent of Indigo at $12.8 million.

Stock in both companies has lost much of its value since the start of the year. Yesterday the CP1 stake was worth about $10.5 million and the Indigo stake about $6.6 million.

Grocon bought its 17.91 per cent of CP1 for $34 million in June last year, but paid nothing up front as the deal was financed through a loan from the City Pacific group. The shares are now worth just $6.1 million.

Grocon spokeswoman Jane Wilson said the company's representatives on the CP1 board, Daniel Grollo and Stephen Scanlan, would "continue to monitor the situation".

City Pacific, which recently sold development rights to a Townsville marina for $30 million, told the ASX it was negotiating with "a range" of un-named parties interested in "several of the company's assets".

It said slow repayments from property developers to its flagship First Mortgage Fund have made it harder to repay $130 million owed to the Commonwealth Bank. And it's to slash the value of its residential mortgage business, which has been hammered by the credit crunch.

A decision on how much goodwill to write off has been put off until after the end of the financial year.

Payment of a 15c a share dividend, originally due April 30, has been further delayed. In April the company announced the dividend would be dribbled out in five monthly instalments of 3c.

But in an announcement issued after the market closed yesterday City Pacific said it would delay paying the instalment due on Monday for another month.

City Pacific spokesman Mike London did not return calls.

City Pacific's scrip closed down 12.8 per cent, to 34c.