Auckland housing developer folds after lender says ‘no’

46 Friedlanders Rd in Manurewa is being advertised for sale after the owner went into liquidation. Photo / supplied

A lender refused to fund an Auckland residential developer whose failure was blamed on not just its inability to get the money but also the housing downturn.

JHIM Homes is in liquidation, owing an estimated $417,000 after it made an unconditional offer - not even specifying it needed to get finance - on properties a lender then refused to fund.

The company, only established five years ago, was forced to abandon the purchase but incurred fees on the ditched deal.

Pritesh Patel of Patel & Co wrote about the string of problems that resulted in the failure in his first report.

He said the company seemed caught up in a big shift in the Auckland property market, general economic stress, rising interest rates, a declining property market, and increased loan restrictions, especially for investors.

Patel did not name the lender who refused to fund a deal but he has asked Barfoot & Thompson Manurewa to sell the company’s two properties: one in Manurewa’s Friedlanders Rd, mortgaged to Westpac and another in Beeston Cres, mortgaged to Avanti Finance.

He said JHIM Homes’ liquidation would be the first of many he expects in the field of residential development. Other companies are also under pressure and could be placed into liquidation given the current market conditions, Patel said today.

The two Manurewa residential properties being sold had High Court freezing orders imposed last month after an application by plaintiff Mockingbird Properties which is a creditor of JHIM Homes, Patel said in his report.

“[What] triggered the insolvency is the refusal of a lending institution to provide funding for an agreement to purchase a property, signed unconditional,” Patel noted.

To avoid such situations, most buyers who need loans make offers they make conditional on being able to get finance.

But JHIM failed to put that condition in its offer agreement.

“The property was resold and the vendor is now owed a sum of $407,353 made up of loss of resale, real estate agent’s commission on reselling the property, default interest, outgoings an maintenance costs, penalty, legal and other costs on re-selling the property,” Patel wrote.

Accident Compensation Corporation, Tower Insurance, Inland Revenue, Westpac, Avanti, Auckland Council, Ajay Jhim and Lashman Jhim are listed as known creditors of the business.

IRD is estimated to be owed $6500 but how much will be available to repay creditors is yet to be established.

Patel’s report said the Friedlanders Rd property was being rented at $650/week and Beeston Cres at $730/week.

Westpac is owed $1.3m and Avanti about $652,000.

A creditors’ meeting was held last week where Lynda Smart told Patel that she and Geoff Brown from Rodgers Reidy were approached to become the liquidators.

Minutes of the meeting showed Ajay Jhim is claiming $35,400, Lashman Jhim claiming $495,000, the council wants $1362.

Other housing developers have failed lately. Last year, the Herald has reported on DDL Homes at Ormiston where creditors are claiming $55.7m.

Before Christmas, Podular Housing also failed with an estimated $5.2m deficit.