Troubled developers owe $53 million

SMG Properties, one of the companies which developed Queenstown's five star, $100 million The Rees Hotel, owes almost $53 million to its creditors, according to the liquidator's latest report.

Meanwhile, directors of The Rees Hotel Ltd, which operates the hotel and is not in liquidation, are understood to have received an offer to buy the complex, including undeveloped land, earlier this month.

A letter obtained by the Otago Daily Times, dated February 16, to The Rees Ltd (TRL) apartment owners from the TRL board, said the directors had received "an unsolicited offer" from Distinction Hotels.

The offer was to buy the management rights and related assets for the operation of the hotel/apartment business, which included 32 unsold apartments and an undeveloped lakefront parcel of land.

Distinction Hotels is a national company with six hotels in New Zealand - two at Te Anau and one each at Fox Glacier, Queenstown, Rotorua and Wellington. It also owns the former Dunedin Chief Post Office and has plans to develop it into a hotel.

The letter said due diligence began on February 8, with the signing of a "comprehensive confidentiality agreement".

However, the letter said "the directors of TRL do not welcome this unsolicited offer position".

TRL chairman Geoff Burns would not comment on the offer.

The complex features 89 units on the Frankton Rd site, including 60 hotel rooms and 23 lakefront residences.

Beech Cove Properties Ltd owned the properties on 275-395 Frankton Rd, with SMG Properties Ltd as the contractor. Lindsay Singleton, of Auckland, is listed as SMG Properties Ltd's sole director - the company was placed in liquidation on January 28, 2011. When approached by the ODT, Mr Singleton declined to comment.

Liquidator Keaton Pronk, of Insolvency & Trustee Service said in his latest report on Tuesday the balance of funds on hand was $91.07, with the company owing a total of $52,862,992.

It is understood the Bank of New Zealand and Dominion Finance Group loaned Beechcove Ltd a total of almost $100 million when the company had little more than four years' development experience.

BNZ and Dominion Finance Group are owed a total of $51.45 million as secured creditors.

Around the same time the company funded The Rees development, it funded real estate developments in Auckland, New Plymouth and Christchurch.

The report lists 59 unsecured creditors, including the Inland Revenue Department, which is owed $1.25 million.

The liquidators' report said the prospect of a dividend payment was "unlikely".

In 2008, the $100 million hotel and apartment complex was finished - about three years past its expected completion date. It was to have been officially opened by Prime Minister John Key, but Mr Key pulled out amid a dispute between SMG and the contractors on the project.

At that time it was alleged at least 10 creditors were owed more than $1.4 million.

Queenstown R.H.E Mechanical owner Warwick Stalker told the ODT yesterday a "substantial amount" was still owed to his company and plumbing company Flints - an amount believed to be about $30,000.

In November 2010, Beechcove and SMG were ordered by the Environment Court to pay more than $19,000 to the Queenstown Lakes District Council for "flagrantly" disregarding the terms of their consent and allowing workers and contractors to park-off site during construction.