Viaduct apartments company fails under rising tide of debt

Photo: Chris McLennan

Lighter Quay apartments, above, are marketed by David Southcombe, pictured below with wife Aja Rock.

Photo: Olivia Hemus

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Money Managers clients could be the main losers from the collapse of another pillar in the crumbling property empire of developer Nigel McKenna.

Melview Halsey, part of McKenna's embattled Melview Developments group, was put into liquidation at the request of Inland Revenue a week ago.

The company was a holding vehicle for unsold apartments in the Lighter Quay development, an upmarket project next to the Westin Hotel on Auckland's Viaduct Harbour, which Melview completed in 2005.

Melview Halsey still owns six apartments in Lighter Quay but the company's liquidator, Dennis Parsons of Indepth Forensics, said the secured debt over the properties was well in excess of their value.

That's likely to be bad news for clients of Money Managers (now called MMG Advisory Partners) who, through a circuitous investment channel, are likely to have provided much of the funding for the development.

There are two mortgages over Melview Halsey's apartments – a first mortgage to Real Estate Credit (formerly Torchlight Credit Fund Holdings), a vehicle set up by George Kerr's Pyne Gould Corp to take on impaired loans, and a second mortgage to Martyn Reesby's Structured Finance, which drew much of its money from four First Step funds promoted by Money Managers to its investor clients. Structured Finance has defaulted on its repayment obligations (to the First Step funds) and is operating under a moratorium.

Real Estate Credit's mortgage secured up to $21 million while Structured Finance's security was for $30m, although large sums would have been repaid as the units in the development were progressively sold down. It is not known how much is still owed.

The Lighter Quay apartments are on leasehold titles, a structure which has proved unattractive to buyers, and some of the apartments in the complex which have come up for resale have sold for around half their original purchase price.

Many of the remaining unsold units have been marketed through a company called Lighter Quay Sales which is owned by Dave Southcombe, a property developer and business associate of Strategic Finance director Marc Lindale and former Strategic director Brian Fitzgerald. Southcombe is best known for his frequent appearances in the gossip pages as the husband of celebrity socialite Aja Rock.

The couple were also in the news when a man fell to his death from their Auckland apartment in 2008.

Structured Finance holds debt security over Lighter Quay Sales and the apartments it sells.

Structured Finance also holds a second mortgage over McKenna's own Lighter Quay penthouse apartment, which is up for sale.

The luxurious apartment, with three bedrooms, three bathrooms and three car parks, has a rating valuation of $3.6m. Structured Finance's second mortgage secures up to $4m and sits behind a first mortgage to BNZ securing up to $3.425m, although it is not known how much may actually be owed on the loans.

Melview's massive Kawarau Falls development near Queenstown was put into receivership in May last year, followed by Melview Featherston St in November.

Another Melview company, Melview The Quays, which owns retail premises near Viaduct Harbour, is facing a liquidation application in the High Court, brought by the body corporate of the building the premises are located in.

- © Fairfax NZ News