Magsons, trading under the Nido brand, collapsed into receivership on Friday. Video / Will Trafford
An investment offer that saw $62m raised to develop New Zealand's biggest homeware store in west Auckland was not required to be licensed by the Financial Markets Authority.
Magsons Hardware, trading as Nido, went into receivership on Friday and the store's builder, Vijay Holdings, went into liquidation last month.
TheNido store was funded from a mix of debt and equity, the latter raised by Maat Group through a syndicate-style arrangement called Central Park Property Investment, directed by Neil Tuffin and Mark Hughson.
Retail investors contributed $30m with a further $7.5m coming from Magsons Investments, an associate of Magsons Hardware, both directed by Vinod Kumar. Auckland lender Pearlfisher Capital provided a $25.1m loan.
Last year another company, Central Assets Investments, advanced $6.25m for stock and plant, fixtures and fittings.
The receivership has thrown into doubt whether retail investors will recover their $30m of capital let alone the 8.5 per cent annual return as outlined in the investment statement.
An FMA spokesman referred to Maat's role in ensuring investors' money was safe in the Nido property.
"It's the responsibility of market participants to ensure their product disclosure statement is compliant before commencing their offer. Issuers are required to clearly and concisely explain the risks associated with an investment, and how investor funds will be used," an FMA spokesman said.
Maat Group's product disclosure statement outlined the risks people were taking putting money into the fund. Those risks included:
• Insolvency or credit risk of Vijay Holdings which built the store. • Insolvency or credit risks of Magsons trading as Nido. • Tenant default - Magsons being unable to pay the rent.
The FMA spokesman said the authority "does not comment on individual offers, however we note that the Central Park Property Investment offer is closed and structured as an equity offer, rather than a managed investment scheme (MIS) offer. Equity issuers do not require licensing from the FMA".
Two common methods of offering property investments to retail investors are equity and managed investments schemes (MIS).
An investment company can legitimately be used as an alternative collective investment structure in place of a MIS.
Both structures - MIS and equity - have disclosure and financial reporting obligations under the Financial Markets Conduct Act 2013.
MIS managers, however, must also be licensed by the authority before they can make an offer to retail investors.
MIS and equity offers are also subject to fair dealing requirements. Offer documents and advertising cannot be misleading or deceptive.
Maat's offer had more than a page headed "Key risks affecting this investment".
It started out by saying: "Investments in shares are risky. You should consider whether the degree of uncertainty about the issuer's performance and returns is suitable for you."
Nor was it clear how investors were to trade their shares if they wanted to, or get their money back in the end.
Nido at Henderson. Photo / Michael Craig
"Central Park does not intend to quote these shares on a market licensed in New Zealand and there is no established market for trading them. This means you may not be able to sell your shares," the offer said.
Pearlfisher Capital put $25.07m into the offer as debt finance. Investment banking firm Jarden became a half-owner and joint venture partner of Pearlfisher in January 2017.
Two farmers in the New Plymouth and Hawera regions said they had each invested $1m into the Central Park offer. They got about $5000 a month from their investments, they said.
The offer was made so that the Nido property could be purchased and the store and a 650-space carpark built: a 27,682sq m building at 156-160 Central Park Dr, Waitakere.
Neil Tuffin, Maat managing director, said last month he was talking to Nido founder and chief Vinod Kumar about providing financial assistance after builder Vijay Holdings went into liquidation.
Today, Tuffin said he could not comment about the Central Park offer "until later in the week. We are looking at all options and I can't speak until we have clarity."
Asked how safe the money in the $62m fund was, he said: "We are working through it but it's all in the hands of the receivers."
He was referring to Central Park's failed tenant, Magsons.
Maat says it takes its name from the Egyptian goddess of truth, justice and balance.
