Mr Kelly had built a portfolio of four large hotels – the North Nowra Tavern in southern NSW, the Crown Hotel and the Rose & Crown in Sydney, and the Corrimal Hotel in Wollongong.All four hotels were placed into administration late last week.However, at the centre of the dispute that shuttered the company is a stoush over whether Mr Kelly and Pub Invest had paid itself more than it was owed under the management agreement.“The expert report from Pitcher Partners, whilst not comprehensive nor definitive, concluded that for the years 2018 to 2020, the (hotels) may have been paid a total of $535,000 in excess of what was payable under the management agreement,” a creditors report written by Joseph Hayes and Andrew McCabe of Wexted Advisors reads.“We understand, following correspondence with unitholders in or around December 2020, that $309,000 was repaid by Pub Invest … the draft Pitcher Partners report we have sighted also identified a number of other potential claims, which were not definitive nor quantified.” The matter is due to be heard in the NSW Supreme Court earlier next year.“We note that as at our appointment, the drawings accounts … exceed their respective share of profit accounts by $2.2m, suggesting that unitholders may have been paid more than entitled and/or available from retained profits,” the report continues.The issue appears to have quietly appeared in October, after Clear Run Investments, the private vehicle of another Mosman resident, Rowan Hookaway, sought orders to remove Pub Invest as trustee of the hotels trust.On October 11, interim orders were made in the Supreme Court restraining all the assets of the company, leaving Mr Kelly’s company unable to pay its liabilities. Mr Kelly declined to comment when contacted.“Our preliminary investigations indicated that the companies may have traded whilst insolvent from as early as (October 11),” Wexted’s Mr Hayes and Mr McCabe wrote in their report.The four hotels have a total book value of $76m, and the company has a $38.5m facility with Commonwealth Bank. The bank did not respond to a request for comment on Tuesday.“The companies have net asset surplus to meet all creditor claims in full. The management accounts disclosed a positive net asset position for each of the companies from FY19 to FY21 and as at the date of our appointment,” the Wexted Advisory report into four hotel operations notes.The last of the four hotels, the North Nowra Tavern, was only acquired by Mr Kelly’s company in July last year for about $14m.It was sold by Amazonia Hotels, run by Sydney publicans Mark Duggan and Gary O’Donnell, who paid $7.85m for the property in August 2017.The pub group had previously purchased the last venue owned by the Lantern Hotel Group, the Crown Hotel in Sydney’s Surry Hills, for $26.1m.The business empire is set to be sold and the companies liquidated, with administrators noting this would deliver the best return for investors. No rescue plan for the business has been proposed.But the collapse of the investment scheme may prove a boon to investors, who will exit the pub investments at a high.Administrators have received a bid of almost $110m for the four pubs, but a sale process will take place to flush out big buyers.Three agents are being considered to lead the sale, which would land any buyer access to Sydney’s CBD and suburbs, as well two regional locations.A pub industry insider said the market depth for pubs of their calibre was “profound” and there would be “no shortage of buyers”.Mr Kelly started the pub investment scheme in 2014, snapping up the Rose & Crown Hotel, an institution in the western Sydney suburb of Parramatta. It is now valued at $24.5m, according to the creditors report.In 2016 Mr Kelly made a $10m play for the Corrimal Hotel in Wollongong, buying out the longtime publican Denmeade family.That investment has also proved profitable, with administrators valuing it at $17.1m at least.