Developer's collapse stings NZ financier

The collapse of Australian property developer Westpoint Corporation could cost a major New Zealand financier up to $2 million.

Hanover Group chief Mark Hotchin said his company had made a $2 million provision for potential losses funding Westpoint's major Melbourne project.

"But we think losses could be less than that," Hotchin said of an 18-shop, 304-unit Port Melbourne project jointly funded by Hanover and Bridgecorp Australia, part of Rod Petricevic's Auckland-headquartered funding business.

Hotchin did not expect Hanover to make any interest out of the loan for the large project which is now being finished but said no money had been raised from New Zealanders for the high-profile development, 3km from Melbourne's CBD.

Eric O'Sullivan, finance director at Bridgecorp, said an interim stop order placed by the Australian Securities Investment Commission on a fundraising offer related only to Bridgecorp Australia and had no effect on NZ investors.

Bridgecorp was seeking A$238 million ($271.6 million) when the commission froze the offer, criticising the funder for failing to disclose its full exposure to Westpoint, a major Perth-headquartered developer which has collapsed.

"The Westpoint Corporation loan is financed by Bridgecorp Australia and has no direct effect on the operation of the Bridgecorp New Zealand business, which has not lent any money, nor has any exposure, to Westpoint Corporation," O'Sullivan said.

"The Westpoint situation does not jeopardise any investments made by New Zealand investors in its New Zealand investment products."

Westpoint was developing 10 projects in four cities, mostly via a series of companies which used mezzanine finance which pulled in money from retail investors. In turn, Westpoint blamed construction delays and rising building costs for its problems.

Real estate expert Terry Ryder, a New Zealander who lives on the Gold Coast, said lessons could be learned from the Westpoint collapse.

High-risk lending during a property boom had exposed thousands of Australians to a penniless and sometimes even homeless state, indicating a major gap in the regulation of the real estate investment market, he said.

People should have noted the warning signs well before the collapse and even something as simple as entering the company's name in a Google search could have saved the homes and savings of thousands of investors, he said.

Basic research would have alerted good financial planners against recommending their clients buy Westpoint products, Ryder believes. Westpoint had an aggressive culture which meant it used seminars, telemarketing and in-home consultations to sell its products to retail investors, he said.

Financial planners whose retail clients helped fund Westpoint's developments are blaming the commission for not acting earlier, Westpoint's auditors KPMG and fund rating agencies.

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Westpoint Corporation's collapse:

* The Perth-based property developer was declared insolvent and wound up in the Australian Federal Court last month.

* Losses of around A$450 million ($513.5 million) are expected.

* New Zealand financiers were funding its Melbourne project.

* Bridgecorp and Hanover have joint exposure to Bayshore, Port Melbourne.

* They funded the A$150 million apartment/shopping project under development.

* Both say only Australian investors are involved, not New Zealanders.