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The mystery of Castlepines' billions
You have probably never heard of Castlepines Corporation. Yet every year, says its chief executive David Grose, pension funds and insurance companies ofer him so many billions of dollars to invest that he can’t place it all. Does that sound too good to be true? Jack Lundin investigates
PROF GIRISH MODI, DISTINGUISHED head of neurology at Wits University, must be wondering whether he had a brainstorm when he handed over R1.5 million in US dollars to a company called Castlepines in Sydney, Australia.
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The professor, who also has a lucrative private practice at Life Brenthurst Clinic in Parktown, Johannesburg, stumped up the $130,000 to fund a due diligence by Castlepines Global Equity, lined up to deliver US$300m to kickstart a luxury housing/retail development in north-west Mozambique.
Castlepines Global Equity, registered in the British Virgin Islands, doesn’t publish its annual accounts for public scrutiny, despite being apparently entrusted with billions of dollars annually – in insurance and pension funds dollars – to invest in massive private and governmental projects around the world. Its associated Castlepines Corporation (Australia) Pty Ltd, is just as reticent.
With a tiny staff – one man in Joburg for Africa and the MidEast, working from home – Castlepines flies so far under the radar that some speculate that it doesn’t even exist. Certainly, for the press, they’re a bunch of unapproachable, hard-to-tie-down curmudgeons.
Recipients of Castlepines investmentfor-equity billions must pledge not to give any information about their investor to “any third party, including the investment community”. Should a recipient receive a court subpoena requiring disclosure about Castlepines, there must be immediate consultation “on the advisability of taking available legal steps to resist or narrow such request”.
The Wepani Village development, on 25 hectares outside Nampula, Mozambique’s fourth-largest city is more than 2,000km north of the capital, Maputo. It is the ambitious $600m (R8.3bn – yes billion) shopping centre/luxury housing project of Joburg “funding facilitator” Geoffrey Freeman and Mozambican businessman, Dula Magide.
The master development plan includes 740 apartments, 31 luxury houses and a 160-bed hospital.
Modi came into the enterprise on the carrot that he would run the hospital. His $130,000 payment to Castlepines gave him an 8% stake in Freeman/ Magide’s Mozambique-registered company Wepani Lda.
Modi’s $130,000 was duly dispatched to Sydney in two separate drafts. Then Castlepines dropped a bombshell: they were pulling out. Wepani did not fit their investment criteria; the project was “unbankable”. And the prof’s $130,000 – as stipulated in the now-cancelled Letter of Engagement – was non-refundable. The Wepani partners were incensed and speculated that they had become victims of what Geoffrey Freeman describes as “a global scam operation”.
Says Freeman: “Prof Modi said there’s something definitely strange here. He had this friend who’s in banking in Dubai, who came back and said: ‘Guys, I think you’ve got a serious problem here; these people don’t exist’.”
Freeman has complained to the Financial Services Board that Castlepines “are not what they claim to be or are able to do”. The FSB has confirmed “the matter will be investigated”.
Castelpines’ “man in Africa” Andre Botha tells Noseweek that Freeman is “motivated by malice”.
There has been speculation about Castlepines on the internet for years. Sample postings: We have been seeking information about Castlepines Corporation Australia and its ability to raise funding in excess of US$100m for major infrastructure projects (2011)… They were deregistered in Australia in November last year (2008) …The principal has been subject of litigation with an Australian bank before… They are an unknown entity in Australia although their principals are known…
Geoffrey Freeman, an alumnus of King David School, Linksfield, is a wheeler-dealer in traditional Joburg
Prof Girish Modi (above); David Grose (top right) and Peter Phippen
mould. He describes himself as a “funding facilitator”, and waxes eloquent on current projects such as “facilitating” R2.5bn for a client to snap up Caltex’s 845 petrol stations, and negotiations with Lafarge, the world’s largest cement company, over a 20,000-hectare limestone concession.
Like his Castlepines nemesis, Freeman is a will-o’-the-wisp, with no office, no landline; strictly a laptop-and-cell operator, working from home. He describes Dula Magide (owner of a 57% majority stake in Wepani) as a Mozambique businessman active in Nampula Province who’s just flogged a couple of mega-rich graphite concessions to Australia’s Syrah Resources.
Freeman’s introduction to Castlepines, as he tells it, came via Ken, manager of Mugg & Bean in Sandton City. Over breakfast he told Ken he was on the hunt for some mega funding and Ken suggested he meet one of his regulars, Andre Botha.
“Andre said yes, we can definitely help you,” says Freeman. “He said Castlepines would fund 100%, take 50% equity and at their exit we’d repay the capital plus interest. We just had to put up US$130,000 for lawyers and accountants to do the corporate and tax structuring.”
Botha, 54, is a former advocate who explains to Noseweek that he resigned from the Johannesburg Bar after six years “in order to do other work”. In 2010 he began his present self-employed “contractor” role as Castlepines’ Strategic Adviser and General Manager Africa and Middle East. To help with the job he beefed up on development finance with some short courses at Stellenbosch Business School.
Botha also operates from home – his emails bear the address 12 Anderson Lane, Lambton in Germiston, with a landline number that hasn’t worked for a while. The address is the regular meeting place for an enterprise named HealingPoint, which ministers to trauma victims through “family constellations workshops”, with healing to those suffering from negative emotions, angst or panic.
Castlepines Corp had three founding partners: property director David Grose; E Wayne Starr, a real estate tycoon in Houston, Texas, where he headed Starr Corporation Inc; and Thomas Doo, member of a powerful Chinese merchant family in New Zealand. Starr died five years ago aged 66; Doo retired to Auckland in his 80s.
The venture grew out of Grose Property Holdings, a New Zealand property investment company formed by David Grose in 1975. Around 25 years ago Grose joined up with Starr and Doo and they became Castlepines Corporation, describing themselves as a consortium of private sector investors seeking to buy long-term conservatively yielding assets that provided a secure stream of passive income in order “to provide income to the superannuation funds of the principals”. In other words, Castlepines was a pension money-raiser for Messrs Grose, Starr and Doo.
In the early years, under David Grose at Grose Property Holdings, the trio pursued an aggressive policy of “risk-taking and a preference for undervalued assets capable of renovation”. Later on, “owing to the age of Mr Starr,” a more conservative acquisition style was introduced.
A former Castlepines director is Peter Phippen, present head of Abbotts Valuers, one of Australia’s leading property valuers. Phippen was not inclined to talk to Noseweek. “I have had nothing to do with Castlepines for years – why are you contacting me?” he demanded from Sydney.
What was his role at Castlepines? Can he confirm that when he was involved Castlepines was a genuine global investor with access to many billions of dollars for investment?
Phippen replied: “When Castlepines Corporation commenced operations over 25 years ago and I was recruited, I had to sign confidentiality agreements thicker than an old phone book, so I am unable to help you. I suggest you find another story to pursue – no one who is or was ever involved with CC will tell you anything. People who deal in multi-billions and who make the world turn do not want publicity.”
It’s hardly surprising that Phippen is press-shy. In 2008 he was called before the New South Wales Supreme Court for questioning by liquidator PricewaterhouseCoopers into the demise of Australian Capital Reserve (ACR), a debenture issuer that had collapsed owing 7,000 investors around
Au$300m. It was alleged that Phippen had overvalued property appraisals to assist ACR directors in their eleventh- hour bid to attract hundreds of millions of dollars from investors.
This followed revelations that Phippen had negotiated to buy a coastal apartment from ACR at a discount of Au$200,000. Phippen denied all impropriety and said heart surgery a few years previously could have affected his memory.
At Castlepines today, its now-ageing founding partner David Grose calls the shots as chief executive officer and head of acquisitions. There’s a telling picture of his style in his presentation video at a 2014 fund-raiser in Tunis for Tunisia Economic City. TEC is a grandiose if implausible US$180bn Saudisponsored project to create a “new Dubai” over 90km2 in economically stagnant Tunisia.
In the video (watch it on Noseweek’s internet edition) Grose explains that Castlepines is a private pension fund headquartered in Sydney, Australia. “We are partners with public pension funds and insurance companies who constantly offer me very substantial sums, many billions of dollars per year, for new projects that we do not use,” he tells his audience.
Tunisia Economic City matches the Castlepines criteria perfectly, declares Grose, announcing partner approval for an investment of US$3bn, increasing to US$10bn within five years. “We are ready to start now.”
As for Castlepines’ credibility, rather than “bore you with the past”, Grose gives his audience some impressive if vague information about three of the “more significant” projects that year. With no identification of country or client, they are: l A €4bn rail project in Northern Europe, partnered with a government. A three-year construction programme had begun; l US$800m for barges carrying floating power plants to two African countries to supply low-cost power. Total orders were for 33,180-megaWatt floating plants, for US$6.7bn; l The approval of £6bn “for an energy project”.
Nothing much has since happened with the grand Tunisia Economic City venture. That country remains in economic meltdown and, in sponsoring Saudi Arabia, TEC is no longer considered a serious project. Prince Mohammad bin Salman, the youthful new Deputy Crown Prince, defence minister and head of the embryo Council for Economic and Development Affairs, has little appetite for this sort of esoteric indulgence – he’d prefer to give any spare cash to Egypt.
One project in 2014 that Grose didn’t mention in that Tunis video, but which Noseweek has managed to track down to time and place, was a projected international airport to handle 6.5 million passengers annually, to be built on Van Don island in Quang Ninh Province, Vietnam.
In August that year Dolin Han, chairman of South Korean property company Joinus, announced that Australia’s Castlepines Corp had delivered a written commitment to invest US$1.1bn in the airport and a nearby resort complex. Han said the first instalment of US$800m would arrive after “official agreement had been reached” and construction would begin in the first quarter of 2015.
The following year, however, Joinus was replaced as Van Don’s developer by Vietnamese property company Sun Group. Provincial management authority deputy director Trinh van Hong said a new investor had to be found, as under Joinus, there had been no positive progress.
In Joburg, Andre Botha, Castlepines Global Equity GM (Africa and MidEast) says: “The project in Tunisia has been delayed by political violence in the country, but remains planned for future implementation.” He can offer no amplification on the three 2014 projects scantily mentioned by David Grose in his Tunis presentation. “These projects are ongoing and the details are confidential,” says Botha. He declines comment on the apparent fall-through of Castlepines’ US$1.1bn investment in Vietnam’s Van Don Airport.
Last year Castlepines received more media plaudits for racing to the aid of Australia’s troubled Discovery Metals, offering US$110m to pay Discovery’s debts and develop its underground copper mine in Botswana. Four months later, however, Discovery’s lender syndicate rejected the Castlepines rescue package and Discovery went into voluntary administration.
Regarding Wepani Village in Mozambique, Botha says: “Wepani was unable or unwilling to meet our agreed investment criteria. Accordingly the project failed to satisfy our due diligence examination.
“Unfortunately, sometimes our clients overestimate the commercial viability of their projects and their projects fail our due diligence process, as was the case with Wepani.”
Prof Girish Modi declines to give a view on Castlepines and his lost US$130,000. Andre Botha says: “Wepani paid this fee for outsourced legal and tax advisers to conduct the due diligence on our behalf. This fee is nonrefundable.”
From Castlepines’ “representative office” in London at 39 St James’s Street, Piccadilly (they rent one of those units that provide a swish address) chief executive David Grose emailed Wepani’s Geoffrey Freeman: “You seem incapable of understanding that you have not even remotely met our criteria with your current project. What you do from here is entirely up to you.”
Despite Castlepines’ rebuff, Geoffrey Freeman tells Noseweek he has now secured new investors for Wepani: Industrial and Chemical Bank of China has “committed” to put up half the money, on condition that Bank of China comes up with the other half. Chinese State Construction Engineering Corp, he says, will do the construction. n
