$20m Fiji property loan now Allied Farmers' problem

Allied managing director Rob Alloway. Photo / Dean Purcell

Allied Farmers has taken over a $20 million-plus Hanover loan on a Pacific property project which has hardly started.

Hanover lent money for Fiji's upmarket Pacific Point, a project marketed by Kiwi developers Southpac Group.

Only earthworks were carried out despite investors putting down multimillion-dollar deposits for freehold sections some years ago.

The investors want progress on the site 20 minutes from Suva, or their money back. A group of about 20 have hired Brookfields lawyer Brendan Meech, who described the Pacific Point as "Allied's Hanover hangover".

The Fiji deal is just one of many troubled real estate projects which publicly listed Allied inherited when it bought the loan book of Hanover and United Finance late last year.

Before the assets were sold, investors were told they were worth $396.2 million but Allied said this month the value had shrunk to just $175.5 million yet, despite the huge writedowns, Allied did not think it had been ripped off.

Meech, acting for the investors, is concerned about the Fiji project and lack of progress but said no sunset clause in agreements meant investors could not apply to the courts to get their money back.

No deadlines for work completion had been set.

Deposits of about $3 million were held in another law firm's trust account, Meech said.

Southpac Group wrote to the investors saying the future of the project now hinged on a decision by Allied and it expected to know more by tomorrow.

"The Hanover buyout by Allied Finance has put us in talks with the finance arm of Allied and we are presently working through details of the project with Allied who have indicated a willingness to consider a partnership to complete the project.

"We anticipate this process should be completed by March 31," Southpac wrote to investors on February 17.

The developers blamed Hanover for their woes, writing that payments required to complete the earthworks were stalled early last year because of "Hanover's finance difficulties".

"We made a number of attempts to refinance the project elsewhere but these were unsuccessful for a number of reasons, including Hanover's reluctance to concede priority to a new funder," Southpac wrote.

Rob Alloway, Allied managing director, said he was intimately aware of Pacific Point and had been working closely on it.

"We're actually the first mortgagee on that project. My understanding is that Hanover had been funding it for some time. We met with the borrowers just prior to settlement and they presented us with two proposals for ongoing funding.

"But the project had suffered cost overruns. Our credit and risk in Allied Farmers and Allied Nationwide Finance is substantially tighter than Hanover's was," Alloway said.

"There were a number of investors who were presented with a package which showed a hotel and marina. It's a very pretty package and I'm sure that was put in front of Hanover which loaned more than $20 million, so it's a substantial sum and has been fully drawn.

"It would take a fair bit of work to re-establish the project," he said.

But Alloway does not regard Pacific Point as a dead loss for Allied.

"We view ourselves as being in an equity position in that we can either sell the project uncompleted or do it ourselves in stages, after feasibility studies.

"We fully understand the position the purchasers are in," Alloway said.

Asked to respond to Meech's statement that Pacific Point was Allied's Hanover hangover, Alloway said his aim was to recover money and find a solution to the problems.

"We have 40 to 50 loan accounts and there's a story on each one of those - possibilities and probabilities for unwinding them."

Pacific Point:

* Plans for gated 22ha Fiji sub-division.

* On eastern side of Viti Levu.

* 20-minute drive from Suva.

* Marina and 80-room hotel planned.

* Upmarket housing subdivision.

* Freehold tenure on residential sections.

Source: Southpac Group