Bonds risky move for elderly

By ANNE GIBSON

Ted Denne was a skinny kid, and his father was so slight that the locals would call him the "pocket Hercules."

When Denne was growing up, on a farm north of Urenui in Taranaki, his burning ambition was to change his "skinny flea of a body" into something he could be proud of.

So when he was about 20, a schoolmate talked him into going to the YMCA in New Plymouth and introduced him to weight training.

"The weights lit a fire in me that has never gone out," he says.

Even though his legs felt like jelly after the curls, presses and squats, the "little runt" was determined to bulk out so that by the time he was 30 he could lift twice his body weight.

His best lift was 180kg.

The fire has burned all his life.

At age 80, Denne is New Zealand's oldest champion weightlifter, winning a silver medal at the world masters weightlifting championships in Canada in 1996.

He was 75 then.

Now, the Meadowbank veteran has set his sights on winning gold at this year's world championships in Greece in September.

Trouble is, he has lost the $10,000 he had tucked away for the trip.

Based on advice from Money Managers, he invested it in the ill-fated Park Terrace property bond issue, which raised $7 million for a Christchurch apartment development.

Denne was due to get his $10,000 back last year, along with an attractive 11.5 per cent interest rate.

But the latest letter from bondholder trustee Tower Trust talks of litigation early next year against defaulting buyers and "inevitable delays" in any repayment.

Denne is just one of thousands of mainly retired people who put their money into property junk bonds.

It has also proved a bad move for the investors who sank $21 million into the Auckland Metropolis apartment tower, as well as those who put $8 million into the Ballantyne bond for a residential and golf course development at Katikati, near Tauranga.

In both cases, repayment has been delayed and investors are wondering if they will even get their original investment back, let alone interest.

The Ballantyne bondholders will get back only $4 million of their original $8 million, and certainly no interest.

The Metropolis bondholders have to leave their $21 million in for another three years, according to a rescue plan unveiled by developer Andrew Krukziener this week.

When they get it back will depend on when he can sell the remaining apartments, said to be worth between $32 million and $45 million. What they get back depends on what Mr Krukziener can sell them for.

Back to Denne's problems.

Older investors like him earn no income from working, so keeping what little spare cash they have - as well as tucking it away in nest-egg investments - is paramount.

"When I put my money into this bond issue, I was told the Christchurch apartments had been sold, but they hadn't at all," Denne says, noting the pending legal action against delinquent purchasers who reneged on their contracts to buy some of the 115 apartments.

Alasdair Scott of Money Managers writes in his firm's newsletter, ClientTell, about the flak his firm is receiving for advising clients on the disastrous investments.

"Money Managers has come under fire from the media, competitors and, more importantly, from good clients who have invested in one or other of the three defaulting property bonds. We do care that this has happened.

"We are fortunate that most of our clients do accept that property bonds were marketed - with rates over double that available from similar term bank deposits - as being suitable for the less conservative investor and as suitable for a small part of their diversified portfolio."

Mr Scott stresses how few property bond issues failed.

"Of the 26 property bond issues totalling $150 million that Money Managers has marketed over the past four years, 18 have already been repaid in full totalling $100 million. Interest rates repaid ranged from 10 per cent to 18 per cent per annum. Only three bond issues are in default."

Mr Scott attacks the media for publicity over the defaults, "which comes as no surprise, given the media's propensity to live by the dictum that bad news sells."

Mr Denne says Money Managers advised him not to go to the media with his story, saying it would be counter-productive. He talked to Money Managers chief Doug Somers-Edgar, but found him "unhelpful and aggressive."

In response, Mr Somers-Edgar said that although he could not discuss Denne's personal financial situation due to the Privacy Act, it was clear the $10,000 invested in Park Terrace was not the only money available to Denne for his trip to Greece.

But if he was desperate for the money, Mr Somers-Edgar would make a part-payment, as he had already done with another elderly and terminally ill investor.

But Denne has had enough of staying quiet and waiting for his money. He wants attention focused on the problems the junk bond issues have caused, particularly to retired folk.

"Money Managers should take some responsibility for giving what has proved to be bad advice," he says.

Denne - who also jogs - is working off his frustrations at the YMCA Glen Innes, which has given him free membership.

Money Managers

Tracking the trail of junk bond defaults

Three property junk bond issues are in default. All were marketed by Money Managers, with Tower Trust acting as trustee for the bondholders.

* The largest is Pacific Properties (Metropolis). It raised $21 million to help finance the 38-level Metropolis apartment/hotel complex in Auckland's inner-city. The 1755 mainly retired people who invested were due to get their money - plus 14 per cent a year - on May 20. Now, they may get it back in 2004.

* Pacific Properties (Park Terrace) raised $7 million to help finance 115 apartments on the banks of the Avon in Park Tce, Christchurch. Only 43 have been sold and settled, and the proceeds have gone to the Bank of New Zealand to help reduce the first mortgage. Litigation is expected to start next February against buyers who reneged on their contracts. Investors were due their money - and 11.5 per cent a year - between May and October last year.

* The Ballantyne bond issue raised $8 million for a Katikati residential/golf course development, due to be repaid in September 1999. It promised 14 per cent return a year. Now the investors are looking at recovering only half their capital. The developer defaulted on interest payments and the development is in receivership.