Ross saga may hit apartment sales
The collapse of Ross Asset Management, which snared more than 900 investors in a suspected Ponzi scheme, looks to have spilled over into Wellington's high-end apartment sector.
Three independent sources have told The Dominion Post at least 10 people who put down deposits for properties on yet-to-be built developments will be unable to proceed to settlement because they have been financially wiped out by RAM.
Two highly placed sources within Wellington's property sector have separately reported people losing deposits, but the sources declined to go on the record.
And John Fisk, of PricewaterhouseCoopers, who was appointed as the receiver of RAM, said he had heard similar stories on a second-hand basis, but had not had cause to follow them up.
It comes as a double blow to RAM investors as they are likely to lose their deposits too.
And, should property values fall before the development is complete, they could be liable for the shortfall between the final resale price and its original cost.
High-end apartments in the city sell for $2 million to $5m, and developers typically ask for a 10 per cent deposit when buying off the plan.
Property developer Willis Bond & Co managing director Mark McGuinness said he was aware of two RAM investors who put down deposits at the firm's Clyde Quay Wharf development.
However, McGuinness stressed that it had not affected their ability to settle on his development, situated in Oriental Bay. So far the firm has sold 66 properties on the 76-apartment development, with construction already well under way.
RAM, owned and managed by David Ross, was put into receivership late last year after investors were unable to access their funds.
A PwC investigation into the fund, which Ross claimed was worth $450m just before the collapse, found about $10m in assets to back it.
While Willis Bond & Co has said its Clyde Quay was not affected by the RAM case, it is unclear who the other firms are.
Pierre Limn, a real estate agent at Tommy's in Wellington, said it was almost an "inevitability" that the high-end side of the market would be affected by the RAM collapse. "If I was a developer, I certainly wouldn't be broadcasting the fact I have a property where people were unable to settle," he said.
A sharp rise in buyers unable to pay settlements could also potentially affect developers' funding lines.
Property lawyer Fintan Devine said banks often premised their loans on specific criteria, particularly among less established operators, and indications of settlement problems would raise concerns.
"The banks are quite cautious with lending to developers," Devine said.
However, Wellington's high-end apartment market is starting to pick up momentum in the wake of the global financial crisis.