Nido investors facing losses: lender strikes $46.3m conditional property sale

Investors in a planned large-scale retail homeware store face losses after the building's conditional sale for $46.3 million came in well short of what was raised to buy the property.

Neil Tuffin, managing director of Maat Group, wrote to shareholders in Central Park Property Investment this week to inform them of the conditional sale of West Auckland's Nido building.

But the scheme, which in total raised $62m, could only see $46.3m being returned at best, although a further $10m could be deducted by the lender.

Pearlfisher, partly owned by Jarden, loaned $25m on the Nido property which shut in March so the lender called a mortgagee sale to recover short-term financing.

Tuffin said the property was now under contract.

"We have been advised by Pearlfisher Trustee, the mortgagee of the property, that they have exercised their power of sale and have signed a conditional contract to sell the property for $46.3m," Tuffin wrote to investors this week.

Those investors put around $35m into the building and Pearlfisher loaned $25m but an investor said that has now climbed to $35m, partly due to the 21 per cent interest being charged as well as penalties and fees.

All up, the investment scheme was $62m, so investors could suffer a loss of more than $20m if the sale goes ahead.

But Tuffin said the sale was conditional on the Nido building being finished and Auckland Council granting a Code Compliance Certificate before October 31.

"Assuming the sale proceeds, Pearlfisher will deduct all of its fees from the proceeds of the sale including the costs to complete the building, base interest, penalty interest and monthly loan renewal charges together with its legal costs and the selling agent's costs of sale," Tuffin said.

"This is a disappointing outcome," Tuffin said of the project which he said Maat had worked hard on for four years "with a strong belief in the Nido concept. We put all our efforts into making it a success with many hours of meetings and strategic reviews."

An investor expressed disappointment about the situation.

From a previous communication, it was estimated that PearlFisher would be owed $35m at the end of May. This included the original loan, costs to complete the building and interest to that date, the investor said.

Tuffin said Maat was "deeply sympathetic to the investors who, like us, shared the Nido vision. We are very appreciative of all the support which we have received from investors and apologise for the end vision not being achieved.

"We are in close contact with Pearlfisher to seek to maximise investor returns from the sale. We are also working with the liquidators of Vinod Kumar's entities to see if there is any recourse against Mr Kumar personally for the losses the investors will suffer. We will report on that separately and provide more details on the project investors' returns when we know more," Tuffin wrote.

Tuffin also referred to the 13 other property investment schemes which Maat has arranged for investors and continued to manage.

The financial outcome of the Nido scheme would not impact in any way the performance of those other 13 schemes, he said.

"The Nido investment was a stand-alone development project and unlike any other of our investments which are investments in completed and tenanted buildings. That is our preferred model and it is our intention to focus on this tried and tested model in the future," Tuffin wrote.