The remnants of a disastrous Brooklyn housing development on which Lombard Finance lost more than $40 million have finally been sold for just a fraction of what the failed financier poured into it.

Receiver John Fisk is now looking to take legal action on behalf of investors against Lombard for the way it sank so much money into such a disastrous venture.

He was commenting after the sale of the last of its secured assets - 7.9 hectares of steep scrub-covered hillside in Ohiro Rd - for $650,000. It was there that bankrupt former developer Lance James planned to build about 500 houses.

The latest sale means Lombard investors will get back about $2.5m of the $42m it advanced on the development.

Clearly, it was a disastrous investment, Mr Fisk said, and he was investigating why Lombard had advanced so much money, and whether a claim on behalf of investors could be made.

Lombard's loans were advanced to support what was to have been a development of 600 houses. Only about 20 to 30 were built in the first stage, and loans escalated as expected sales did not eventuate.

The first part of the Brooklyn subdivision, which included six nearly completed houses, sold two years ago for $2.25m. The houses have since been completed and sold, and the rest of the subdivision is now being put up for mortgagee sale again, this time by another finance company.

If sold, it will be the second change of ownership in the two years since it was sold by Mr Fisk.

The partially completed 1.9ha subdivision was bought in September 2010 by Peter Barzukus' company, Gordon Place Development, for $2.25m. Twice-bankrupted convicted fraudster John Mouroukis was appointed project manager.

The development was plagued by delay and Mr Barzukus said he had lost his investment, was evicted from his home and faced bankruptcy when his financier sold four houses to Neville Jeffrey's Brooklyn Rise company.

James Kellow, a director of Auckland-based finance company Reesby & Co, which acted for first mortgagee Spinnaker Capital has since taken possession and is now selling the remaining 1.8ha of the development in Tiketike Way. It consists of a road and outer residential zoned land.

The land has a 2009 rating value of $719,000.

Mr Kellow was not prepared to say what Spinnaker Capital was owed but expected to get full recovery from the mortgagee auction. However, he said there were two other mortgages on the property.

It was uncertain whether Wellington City Council consents for sections still stood but Mr Kellow believed at least eight or 10 could easily be developed.

The buyer of the hillside block in Ohiro Rd is semi-retired Island Bay builder and developer Lindsay de Bes, who has sold two parcels of it to his sons for them to build their own homes there. He said he was still investigating options for the rest.

DEVELOPMENT DISASTER

2004: Developer Lance James starts with a plan to develop 90 houses at Brooklyn Rise, followed by another 500 on the rural-zoned Brooklyn Views.

2007: Development taken over by Auckland developer Tim Manning.

2008: Development falters with about 30 houses built and sold. Lombard Finance goes into receivership, owing $111 million to about 3600 unsecured investors.

2009: Receiver demolishes some partly built homes that were damaged by exposure to weather and calls tenders for the remainder of the subdivision, which included six nearly complete homes.

2010: Brooklyn Rise sold for $2.25m. James jailed on charges of avoiding tax and wrongly using PAYE deductions.

February 2012: Lombard chairman Sir Douglas Graham and directors Bill Jeffries, Lawrence Bryant and Michael Reeves found guilty of making misleading statements in documents seeking money from the public between December 2007 and April 2008, when Lombard was put into receivership. All sentenced to community work, with Graham and Bryant also ordered to pay $100,000 each in reparations.

August: Brooklyn Views sold to Island Bay builder Lindsay de Bes for $650,000. Sale crystallises Lombard's loss on the development at about $40m.

Contact Hank SChouten
Property reporter
Email: hank.schouten@dompost.co.nz

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