Kiwibank facing loss on real estate exposure

Don Ha Photo / Herald on Sunday

Kiwibank, which earlier this year reported a big drop in interim profit as bad loans from unsuccessful business lending jumped, is facing a loss on the $7 million it lent to Auckland's Don Ha Real Estate and associated businesses.

Kiwibank pulled the plug on the realtor and property manager, run by former Vietnamese refugee Don Ha, on March 17 appointing Grant Thornton's Tim Downes and David Ruscoe as receivers.

The state owned bank had a general security agreement with the company, to whom it had made "various" loans, Grant Thornton says in its first receiver's report.

The receivers were appointed after a default on the loans to Kiwibank.

"Since our appointment we have disposed of the business and fixed assets of the company, realising $1.35 million," Downes and Ruscoe say. Of this, $1.2 million has been repaid to Kiwibank.

The receivers say Kiwibank was owed $7.06 million at the time of its appointment.

This comprised $154,991.31 owed by Don Ha Real Estate and $6.9 million borrowed from the bank by the wider Don Ha Group that the realtor guaranteed.

"Based upon the information available it is unlikely that the general security agreement will be paid in full from proceeds arising from the receivership of the company," Downes and Ruscoe say.

They also say they are verifying whether they can collect $2.5 million due to Don Ha Real Estate from 15 related parties, including some that have ceased trading.

In February Kiwibank said its profit for the six months to December 31 fell 41 per cent to $13.9 million from $23.5 million in the same period of the previous financial year as bad debt provisions more than doubled.

The bank's provision for bad debts jumped to $45.5 million from $19.5 million with CEO Paul Brock saying these were largely unsuccessful business investments.

Ha, a prominent property investor, real estate agent and seminar promoter, was reputed to have been worth $60 million before the property bubble burst in 2008. When Don Ha Real Estate was tipped into receivership Ha said management controls at the firm were weak and his bank didn't understand his position.

"Without going into too many details it came to my attention recently that some of the management controls and reporting systems employed by Don Ha Real Estate Ltd weren't what they should have been," Ha said.

"I am confident that the bank which put me into receivership doesn't have a true understanding of my position.

I wish they had communicated with me more before taking their action because this could have been avoided," he said, adding there was no reason for anyone connected to the business to be worried and it was "business as usual".

- INTEREST.CO.NZ