KEY POINTS:
They perched on window ledges, crammed into the rows of blue plastic chairs and shuffled around at the back of the hall, fanning their faces with wads of documents.
Ordinary people driving ordinary cars. The men in jandals, shorts and T-shirts, the women in floral tops, three-quarter trousers or skirts - with a fair helping of jewellery on display.
The 149 mainly middle-aged, middle-class people who jammed into a scorching Auckland hall last Wednesday night had more than age or appearance in common: all had paid money to residential investment specialist Blue Chip or its associates for apartments or townhouses. And all were out of pocket, worried and wondering what to do next. As one investor wrote on the Property Talk website the next day, they were united on many fronts. All in much the same age group, all with different stories but one thing in common: not knowing what to do next, wrote "Babooshka". At their age, none could afford to be out of pocket.
Many did not have the resources to enlist legal help nor any clear understanding of the legal process, Babooshka wrote.
Outside in the carpark, a more formal group in businesswear stood out from the investors: elegant and eloquent barrister Paul Dale, punchy TV personality/property author/investor Olly Newland and his prolific publisher, Peter Aranyi.
Dale told a funny story about a Hong Kong scam involving a sharp scheme for getting a driver's licence and the group wandered into the hall smiling.
Diminutive grandmother Greta Norman, of Epsom, was first to grab the microphone. She hushed the audience to introduce Dale, thanking people for coming from all over New Zealand. Then, talking like a no-nonsense judge, Dale established the ground rules, warning the audience against making any extravagant statements.
Dale's first public involvement with Blue Chip came when he fronted up in the High Court at Auckland just before Christmas, representing businessman Jack Hoggard, who sought an interim injunction against Bribanc, a company that manages properties for Blue Chip.
At the Green Lane hall, Dale attended as a legal expert able to provide advice to the larger group. The aim, he told the meeting, was to get people their money rather than bringing the company to its knees. He discouraged any rash talk of fraud, saying it was unfruitful, and encouraged people to organise themselves into smaller groups.
He empathised with the investors and said the situation was so ghastly that some might have simply no idea of what to do.
After Dale, it was Newland's turn to pose a series of "hands-up" questions to show the investors that they didn't just have one problem but many.
First, he asked for a show of hands from those who had paid deposits for properties not yet developed. That drew a fair swag of hands. Next, he asked for a hands-up from those who had concerns about code compliance certificates - the documents that say a council is satisfied with a building.
That drew a large group, too. People scanned the hall to see who was in their group.
But the third and by far the largest group were those who were owed large rental arrears.
Rigid faces accompanied the hands as Newland called for those owed two weeks' rent, then three, five, six, eight, nine, 10 weeks'.
The hands stayed up as the weeks went by. Three months'? Hands stayed high, faces stony. Four months'? All hands went down.
Then he asked who had mortgaged their family house to buy into Blue Chip. Up went the hands again.
When the meeting finished, people introduced themselves to each other, gathering in smaller groups to tell their stories. "Babooshka" picked up the story the next day: "We frayed at the edges, no one really taking charge because we didn't have the skills, knowledge or understanding. Sorry. I don't mean to offend anyone.
"Most people preferred to send their name and email addresses to Greta Norman. From there, she will assemble people into groups according to problems but the same thing ... where will people take this?
"Personally, my story is a little more complicated in that we are now the proud owners of a $500k one-bedroom short-stay apartment (please try not to laugh). We have enlisted Olly's help but it will be a long, slow process. Also my parents donated $100k of their life savings."
Blue Chip has more than 3000 investors, who own about 2000 properties. No one except Blue Chip knows precisely the scale of the problems with those investments, but Norman - who organised last week's meeting - has a database of more than 300 people and, almost daily, the Herald gets emails from distressed investors.
Together, those investors have units in more than 20 multi-apartment complexes. Blue Chip is still advertising for new clients, mainly by cold-calling them at home.
How did it get to this? Blue Chip's story dates back to July 2004, when the company floated on the stock exchange.
Its arrival was a backdoor business: to get the listing, Blue Chip made a reverse takeover of Newcall Group, a defunct shell company which was once in the IT sector.
When Blue Chip listed, it attracted a lot of interest as the first stock to deal only in residential real estate, which was then booming. Investors in other countries, particularly the United States, have long been able to get exposure to residential property through sharemarkets but this was a first for New Zealand so hopes were high.
Although too small to draw much attention from sharebrokers, the company had hit on a popular formula: a listed company that creates wealth by specialising in apartments, units, flats and houses.
Blue Chip's formula was simple: offer investors the chance to use the untapped equity in their homes to fund themselves into a second or even third property. As the asset-rich and cash-poor hurtled towards retirement, they knew one thing for sure: property was a winner. The more they owned, the better. They had seen the family home rise in value and where others saw a bubble, they simply saw money, money, money.
Blue Chip, in turn, made its money from a variety of charges: for brokerage, "loan structuring advice", arranging and managing insurance, debt finance, rent from tenants, and property or strata title management.
Economist Gareth Morgan warns against overdoing property investment, using the term "going again" to refer to people who, late in their earnings career, make one last giant stab at the property market.
He can entirely understand why Kiwis so love bricks and mortar but, in his 2006 book Pension Panic, he warned that commentators expected a slowdown in inner-city apartments - precisely the sector many Blue Chip investors bought into.
Morgan also warned against over-exposure to property, writing that housing was "stuffed" because its fundamentals were totally out of whack. House prices had soared into the stratosphere while rents had hugged the contours, he said. And history suggested that what went up must come down.
Plus, he complained, New Zealanders poured too much into property, even though the Reserve Bank and a Greek chorus of private-sector economists have been trying to talk us out of our obsession. Yet we still keep lining up with monotonous regularity.
Mark Bryers, one of Blue Chip's founders, had been working in property for some years, particularly around the Queen St area. Apartment developments in the grand old MLC Building at 380 Queen St, in the old Government Print premises on Beach Rd and the RSL Building on St Paul St were just a few of his projects.
Inner-city living was just taking off and he had a vision of upgrading many buildings into residential units.
As with many property developers, not all Bryers' deals went well.
In 2001, he filed a proposal in the High Court under the Insolvency Act to repay 75 creditors claiming $44.1 million. He offered less than 0.3c for every dollar owed.
A year later, he was challenging a High Court judgment ordering him to pay $1.9 million to Harts Contributory Mortgages Nominee Co, formerly known as Reeves Moses Hudig Mortgage Nominee. Justice Colin Nicholson referred to Bryers' "precarious financial position".
Blue Chip listed on the New Zealand Stock Exchange on July 1, 2004. Bryers' biography in that year's annual report said he had a law degree, graduating from Auckland University in 1979, had taken a strong interest in accounting and maths, and had practised as a barrister and solicitor, then gone on to develop a career as a successful entrepreneur and property developer.
Bryers initially took a 75 per cent stake in Blue Chip, an unusually high holding for a listed vehicle.
Chaired by Auckland lawyer Jock Irvine, Blue Chip made good profits. By 2005, it was celebrating its success in a three-part package of documents for the year to December 31, 2004 - all encased in a grand silver package: "The proof" was a 32-page book of financial statements, "Get a life" was a 61-page annual report and "What really counts" was a 24-page financial summary.
Photographs of the middle-aged and elderly featured in the documents, tanned arms holding racing bikes aloft. A grey-haired fly fisherman stood up to his waist in a river. A satisfied Mrs Grinning Racing Biker held champagne bottle and glasses ready to greet her fit spouse. An older man lay flat in the sea, paddling his surfboard.
"Ride your future for all you're worth," said the accompanying text, explaining that Blue Chip let its clients use their equity to secure their future. Although the company knew this was "different", it said it was also "smart" and, when it came to investing, people either caught the wave or missed the bus.
As well as Bryers and Irvine, Blue Chip's directors at the time included American Jim Bracknell, of Newcall, and former National Party politician Wyatt Creech.
Bryers wrote in one of the 2004 documents that being listed built Blue Chip's credibility and offered transparency.
The company told how its founders saw in the late 1990s that many people were unaware that they could use equity built up in their homes and businesses to create passive income and wealth for themselves.
But the company was exceedingly complicated and needed to get waivers from the NZX for the fact that its shares were owned by a relatively small group of people, with Bryers holding the lion's share of the company, and for deals with some of the many other businesses connected with Blue Chip.
The investment community tends to favour widely held stocks and companies that don't do deals with themselves.
Blue Chip's own company documents showed related parties included Blue Sky Holdings, Serena Trust, Auckland Residential Property Trust, RO Block 2 and Analogy Systems.
A flowchart detailing the structure showed many other businesses, including Bribanc Property Group as the property management entity and ART Apartments as the corporate lessee responsible for short-stay leases.
After listing in New Zealand, Blue Chip moved into Australia, which it said was a larger and better market.
The company moved fast, and by late 2005, said it would list on the Australian Stock Exchange as well as the New Zealand market.
On December 16, 2005, New Zealand shareholders in Blue Chip Financial Solutions raised hardly any questions when they approved a series of related-party transactions between the listed residential property specialist and its majority owner, Bryers.
The meeting approved 10 deals to buy various businesses closely related to Blue Chip, Bryers and his associates, and to issue A$30 million (then $43 million) of new shares in Australia and list on the ASX. By then, Bryers owned 61 per cent of the company but was gradually reducing his holding.
The share price on the NZX languished, brokers showed little interest and in October 2006, Bryers and Irvine said Blue Chip would leave the NZX and be listed only in Australia.
"In the short time in Australia, it has quickly become clear to us that the larger Australian market offers even brighter prospects," Irvine wrote in the notice of special meeting of December 2005.
At one stage, the company's share price got close to A$2.
By February 2007, a scrap between Inland Revenue and Blue Chip emerged in an unusual way: IRD put a public notice in the Herald, saying it was about to liquidate the company.
Blue Chip admitted it had a disagreement with IRD over taxes due and that the IRD had begun proceedings in October 2006 as standard practice.
But in December 2006, Blue Chip said all issues relating to the matter were successfully resolved and agreed by the IRD and it was only a paper mistake that had resulted in the notice.
By last September, the company's results were poor. Blue Chip lost $2.6 million in the June half-year, a drastic turnaround after booking a $7 million profit in the previous half-year. The reason was delays in property settlements, the company said.
Traditionally, about 70 per cent of property sales took place in the second half of the year, with sales lifting in spring and settling over November and December, Blue Chip told the ASX.
Things would come right and the company would return to profitability, it predicted.
At the same time, the company announced a huge shake-up, halving staff numbers at head office in Auckland in a move to help increase profits.
Marisa Rakich, Blue Chip's marketing communications manager at the time, said the firm had about 100 people working in Auckland but it was now changing its business model, decentralising administration to its network of 10 licensees.
By now, the share price had sunk to A58c.
Then, last spring, investors began complaining about a number of issues. Many centred on a lack of code compliance certificates at The Avenues, a rusticated cedar-style 48-unit development at Albany, which North Shore City Council refused to certify and where the Department of Building and Housing found many faults.
The department's report listed 20 defects, including cracked claddings, problems with textured coatings, flashings above windows, seals around windows and the "questionable" quality of weatherboard material, which was cupping, splitting and showed numerous knots.
Then investors began to complain about many more issues and the Property Talk website was overwhelmed with postings from unhappy investors.
It started last September with the question: "Anyone out there taken legal action against Blue Chip?" and resulted in a tsunami: 757 posts and more than 61,000 views by early this week.
Marc Krisjanous, Property Talk's technical architect, says the website has become a virtual community for Blue Chip investors to realise they are not alone.
Not that Blue Chip is the only property organisation exciting attention among participants in the forum. Even more traffic has been generated by debate about an entirely separate business, Richmastery, which by Monday this week had generated 1800 posts and 115,000 views.
Just five days before Christmas, Dale and Blue Chip were squaring off in court. A body corporate and Tokoroa businessman Jack Hoggard - both represented by Dale - were taking separate cases against Bribanc Property Group, the wholly-owned Blue Chip subsidiary. Justice Raynor Asher said negotiations were going on between the parties and he adjourned the matter.
Dale says a confidential settlement was negotiated but the deadline for payment has passed. He has now made a formal demand for payment.
Early in January, Blue Chip investors' complaints centred on rent arrears but they had other issues too.
Kathy and Martin Faulkner, of Mt Maunganui, said rent payments from Bribanc dried up in late October and they might be forced to sell their family home to fund repayments on two Panmure townhouses.
James Abbott, of Auckland, complained that he was owed $2800 on his Eden Tce apartment.
Kirsti Hansen wanted to get rent directly from tenants in her Auckland apartment after payment problems. And Nicola Williamson wanted money back, after her late mother deposited funds with the company for an apartment which was never settled.
Many investors were relieved to get letters from Neil Bell, chief executive of Blue Chip associate Diem, apologising for the problems and giving a payment deadline to bring all rent up to date. Then real estate company Harcourts stepped into the picture, striking a deal to manage the properties - but paying all rents directly to Bribanc, which was of little comfort to out-of-pocket investors.
Around this time, on January 25, Bryers also agreed to talk about the situation. Blue Chip's New Zealand headquarters is level 20 of the upmarket Qantas House, almost directly opposite Whitcoulls at 191 Queen St.
Although he has moved to Sydney, Bryers was back for a short time and keen to seek investors' understanding. The bulky, blue-eyed Bryers said he understood the emotion among investors waiting for properties or rent.
But he gave the impression of an exasperated landlord: not everything had gone according to plan, but all would be rectified as soon as humanly possible.
Also at the meeting was Jonathan Knox, who held the title of "marketing communications (management contractor)".
Much of the criticism of Blue Chip was ill-informed or just plain wrong, they said, and they were annoyed at many of the comments on the Property Talk website. Neither of the pair was keen to attend the investor rally. Bryers said he hadn't been invited, hoped it would be constructive, but had commitments in Australia. Knox said he was unavailable.
Bryers said rent had not been paid due to a "human error issue of some magnitude". Some investors, he said, had been paid too much rent. He blamed councils, changes in Auckland City's apartment size rules, bank lending criteria, alterations to the Building Code and competitors who had pitched to get Blue Chip's business amid the confusion and complaints.
Bryers did admit, however, that Bell's payment schedule was too optimistic and the task at hand would take more time.
Some people got rent but many others are still waiting.
The investors are now gathering in groups to work out their next step. Newland is encouraging those owed rent to tell tenants to pay them directly and for investors to visit Blue Chip's headquarters.
By Thursday, Blue Chip's share price had slid further, to A19c. Its story is yet to reach a conclusion.
Formula for retirement wealth
Blue Chip's formula is to help people get wealthy by using untapped equity in family homes.
The idea is that people use their main asset to get more assets; the investors' goal is to boost their wealth relatively quickly in a few crucial years before they hit retirement age.
The company is one of a group of firms - others include Merlot Property Investments - which are tapping into a desire among investors to create retirement savings, and offering a hands-off management formula.
No fixing taps, going to tedious body corporate meetings, finding tenants or tracking down unpaid rent for this mob.
The average age of Blue Chip's investors is around 50. Many responded to the company's cold calls; others were tempted by radio advertising.
For those who take up the offer, Blue Chip or its affiliate finds them a property to buy. The investor then takes out a mortgage to buy the property, using the equity in their family home as security.
Buying a rental property offers the investor two tax advantages: they can claim for depreciation of chattels in the property and also for losses incurred in making the mortgage payments.
Rent covered most of the costs, so the proposition was, in many cases, cash-neutral, making neither a big loss nor a big return. But many investors were also given guarantees that, after four years, Blue Chip would buy back the property at a price that promised a capital gain.
Blue Chip also manages the property, finding tenants and promising the investor a steady rental income, after deducting any body corporate charges, insurance, rates and other expenses.
All this costs, of course, but the fees are deducted before the investor gets their regular payments.
"The target market for Blue Chip is not the traditional investors targeted by financial planners and sharebrokers but people who may not have significant investable assets but do have equity tied up in their family homes," the company said in one of its publications.
Or, in the words of a 2005 company report: "Blue Chip New Zealand is a financial structuring specialist providing wealth creation opportunities for clients through smart residential property investments."
An investor's tale
Greta Norman, a grandmother in her 60s and a former real estate agent with Harveys and Hookers, resides in well-heeled Epsom.
When she hit 50 and the kids left home, she decided it was time for her to chase her dreams so for two years she attended a series of property investment seminars.
Real estate was her passion and Blue Chip first came to her attention on a 1ZB radio ad in late 2006.
Being no newbie to property, she phoned the company, then met one of its representatives who told her of the all benefits.
She liked the idea very much.
"I needed a high capital-gain property. Blue Chip offered a capital investment that was not negatively geared. It was a cash-neutral property so it neither made nor lost money. But it would make money when I sold it in 2010 - a profit around $200,000 in just four years from the guaranteed buyback."
In October 2006, she bought one of the more expensive apartments on offer, an $840,000 luxury three-bedroom unit in inner-city Auckland. All went well at first. Then late last year, the monthly rent of almost $3000 stopped arriving.
She made inquiries and was stunned to discover that local and regional body rates had gone unpaid for a time too.
"We were guaranteed that rent and it was meant to be a hands-off investment with a promise to buy it back in four years' time," she recalls. "The rent was changed from fortnightly to monthly and it never occurred to us they could do that."
Norman says she feels for the many other investors owed rent.
She has since received most of the money but says she had to battle hard and complain loudly. She remains confident of the $200,000 capital gain but says the Auckland Regional Council rates are yet to be paid.
She is also still owed a month's rent, which was due on January 25.
She was so upset that she organised last month's investor rally and remains extremely sore about the situation.
