Property scheme runs into problems
One of New Zealand's biggest property bond issues has run into trouble and the 1700 investors involved are unlikely to see all their money until at least two years after they expected it.
Investors who put $21 million into the Metropolis Subordinated Property Bonds in September 1998 expected to be paid 14 per cent annually, over an estimated term of 19.5 months.
However, the trustee, Tower Trust, has written to them saying that the $21 million bond issue won't be repaid on the due date - May 20.
The money raised was used to refinance existing mezzanine debt of the Metropolis development in Auckland's High Street. The 38-level development consists of 345 apartments and 23 penthouses with 17 retail/commercial premises and 210 carparks.
The problem is that the developer, Andrew Krukziener, hasn't managed to sell as many apartments as forecast, consequently the money isn't available to repay the bonds. While the news seems bad investors still have their security and refinancing packages are currently being negotiated.
The bond issue was put together by UPC Securities and promoted by New Zealand's biggest financial planning firm Money Managers.
Money Managers marketing manager Al Scott says the group is "reasonably concerned" about the missed payments, especially since it was not made aware of any problems until quite recently.
Managing director Doug Somers-Edgar says it could take at least two years until all the bonds are paid out.
Tower Trust general manager Glenn Clark says the trustee has been keeping an eye on progress.
"While there have been a significant number of sales to date, all of the proceeds of these sales have been paid to ANZ Bank which holds a prior ranking mortgage over the Metropolis," he says.
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