Mystery over Five Mile Allied Farmers finance

Aerial view of the Five Mile development adjacent to Queenstown international airport. Photo / Supplied

The man behind the $27 million purchase of a Queenstown property development from struggling Allied Farmers is declining to say how the deal is being financed amid speculation Allied may be helping him.

Tony Gapes, whose Queenstown Gateway is exercising an option to buy stage two of the Five Mile site from Allied, says financing arrangements for the deal are confidential. Gapes told interest.co.nz the value of the deal was also confidential but was "around about" the $27 million mark.

However, asked whether speculation Allied Farmers or subsidiary Allied Nationwide Finance was helping him fund the purchase of the 23.4 hectare site, Gapes said he couldn't and wouldn't comment.

"There has been a full confidentiality agreement signed all around the sale, the whole sale both stage one and two, so I'm not prepared to comment, can't comment," said Gapes.

None of Allied Farmers chairman John Loughlin, managing director Rob Alloway or Allied Nationwide CEO John Mallon returned phone calls or emails seeking comment.

The Five Mile deal saw Gapes step up to match a rival offer Allied received from David Mahoney's Tawera Group. When buying stage one of Five Mile from receivers late last year Gapes said Queenstown Gateway had insisted on having an option on stage two.

"We're probably paying a little bit more than I would have liked, but we had to match exactly the terms of the contract they had in place to exercise our option," Gapes said.

Allied inherited Five Mile stage two through its acquisition of Hanover Group's properties and loans last December.

The brain child of well known Christchurch property developer David Henderson, hundreds of millions was due to be spent on the development, which was touted as a $2 billion project once completed. It was originally designed to house 10,000 people in a "Tuscan style" villa/apartment development near the Queenstown airport.

However, Hanover tipped Henderson's Five Mile Holdings into receivership for the non-payment of a loan said to be worth about $70 million. The receiver, Deloitte, sold 7.7 hectare stage one to Gapes late last year and following a restructure by Hanover last November, stage two was taken out of receivership.

The stage two sale isn't due to settle until November. Despite Allied's problems, Gapes said he expected the deal to settle whatever state Allied was in.

"We've had dealing with them (Allied Farmers) as the vendor of stage two and they've been great to deal with."

Allied Farmers' woes mounted last week as Standard & Poor's downgraded the long-term credit rating on Allied Nationwide Finance to CC from B and the company revealed it had sliced another $29.7 million off the value Hanover Group property and loans it acquired last December.

That means as of June 30, pending the audit of Allied's year end results, they're now valued at just NZ$94.3 million. That's 76 per cent down on the $396.2 million value attributed just last December when Allied swapped 1.9 billion shares for debentures in the failed property financier held by 16,500 investors.

Meanwhile, Bryan Connor, general manager for corporate trusts at Allied Nationwide trustee Guardian Trust, said the finance company had made "good progress" on resolving what the trustee deems to be a breach of its trust deed. Allied Nationwide pulled its prospectus last Friday after Guardian Trust gave it 14 days to remedy the trust deed financial ratio breach.

The relevant ratio is that Allied Nationwide must not let its total liabilities exceed 90 per cent of the value of its total tangible assets.

"We're working with the company to get through this," Connor told interest.co.nz.

"The company has made good progress and we're considering a number of options at the moment." He wouldn't say what the options were.

"We just want to work through this with them and get them across the line if we can."

He acknowledged Guardian Trust had brought McGrath Nicol on board to compile an independent report because it had "received some information that we thought we needed to investigate further."

Asked if he was confident the situation would be resolved, Connor said: "I don't know. The company is working with us on this and we're working through some numbers and bits and pieces. We don't know. It'd be great for everybody if we could, but we don't know."


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