The Victoria Property Fund's banker, Heartland New Zealand, declined in April to renew loans to fund manager Britannia Management Ltd and is demanding settlement, which could include Heartland taking property assets and selling them in a mortgagee sale.
The Victoria Property Fund's managers are Craig Myles, of Dunedin, and Roger Bridge of Christchurch, who are also co-directors of fund manager Britannia Management.
Mr Myles is also a director at NZ Funds Private Wealth, a Dunedin-based investment portfolio adviser.
The Victoria Property Fund investors have been told by Mr Myles and Mr Bridge it is "highly unlikely" they will receive any return on their investment.
When contacted on Tuesday, Mr Myles declined to be interviewed and instead asked for written questions, saying he needed time to consult the fund trustees.
At 5pm yesterday, he said he was unable to respond yet, as he worked through the "process", but said the questions "will get a response".
The 20 questions included how much was lost to investors, how many investors were affected and the fund's performance over the past two years.
A 2006 prospectus for the Victoria Property Fund, which started in April 2006 after acquiring 97.3% of Victoria Properties Consolidated Ltd, noted the latter had total assets of $15.02 million, and liabilities of $7.86 million, in its statement of financial position to the end of March 2006.
The Victoria Property Fund's trustee is Perpetual Trust Ltd, which "asked, and authorised" that Mr Myles and Mr Bridge update the Victoria unit holders on the fund's status, in a letter dated May 7.
In a copy of the letter obtained by the Otago Daily Times, investors were told by Mr Myles the status of the fund had "deteriorated further" following a similarly pessimistic update they received in June last year.
"The purpose of this letter is to advise unit holders that the financial position of the [Victoria Property] Fund has further deteriorated and it is highly unlikely that unit holders will receive any return on their investment in the Fund," Mr Myles stated.
One angry local investor who contacted the newspaper, claiming to have lost "tens of thousands of dollars" in Victoria, was angered that assurances had been given to investors in numerous presentations by Britannia Management.
The last asset of Victoria is an interest it has in its subsidiary VPCL Investment Trust, which owns 10.23ha of land zoned light industrial, in Richmond, near Nelson, which was bought for development in 2005 for $5.25 million plus GST.
The September 2006 prospectus for Victoria, co-signed by Mr Myles and Mr Bridge, noted the Richmond purchase price of $5.25 million the previous year and said it had a "current valuation" of $7 million. On completion of development, it would be valued at almost $14 million and if rezoned to bulk retail, it would be valued at $18.1 million.
Although Britannia had sold an additional lot of land in Richmond to reduce its debt to Heartland, it was unable to repay the outstanding amount owed, when its banking facility expired on April 30.
Mr Myles said under the mortgage agreement with Heartland, the latter had the right to sell the land and use the money to repay the debt owed.
"If Heartland exercises its rights and sells the land by way of a mortgagee sale, there is unlikely to be any surplus funds available to the VPCL Investment Trust," he wrote.
Several factors had contributed to the position of the fund, including the global financial crisis. Property projects become "distressed" and were placed on the market in mortgagee sales, which depressed land sales, Mr Myles said.
On another front, VPCL Investment Trust entered into contracts to sell two land lots to the Tasman District Council, but claimed in the investor update the council did not complete the purchase, prompting "a legal dispute with the council ever since".
Mr Myles claimed "delays due to Council processes" meant two years was added to the development time.
"Proceedings have been commenced in the Nelson High Court against the council," Mr Myles said.
He said there had been a potential transaction which could have reaped investors "a small return on their investment"; in designing and building some premises for a major (unidentified) South Island company on land the investment trust owned.
However, market valuation of the completed development would not permit the [Victoria Property] Fund to get funding on acceptable terms.
Mr Myles said investors would be updated on the Victoria Property Fund "in due course".
Tomorrow: Origins of the Victoria Property Fund.
