Westpac ditched planned Albany legal action

Kevin Podmore, chairman of the National Property Trust. Photo / Brett Phibbs

Westpac was about to take legal action over leasehold land terminations in the disastrous Albany property development but investors heard this month how the bank ditched the plan.

Bondholders owed $23.5 million as part of $76.2 million losses for the Albany business in liquidation were told by trustee NZ Guardian Trust on September 3 that the bank had decided not to go ahead with the action.

Westpac was also owed millions in the venture.

Bryan Connor, Guardian Trust's general manager for corporate trusts, said yesterday that the bank was moving on a land dispute.

"It was to do with the leases on the land because the owner of the land [Rick Martin] was looking to take action to cancel the leases and Westpac was looking to take action to stop that. In the end, they pulled back from that," Connor said.

In December, NZ Guardian Trust Company and Albany City Property Investments' board of directors told investors how the bank was planning the case.

"Westpac has lodged an application in the High Court for a hearing on certain legal issues relevant to the sub-leases and this case is scheduled to be heard in March," the letter said.

Earlier this month, Guardian told the same investors that Westpac had pulled its action in the courts "and the leases have been terminated due to the non-payment of ground rent".

"This has resulted in the security held by Westpac and the trustee over the leasehold interest being lost.

"This loss of security crystallises the total loss to bondholders. On this basis, there is no prospect that the company will ever be in a position to repay bondholders any interest or capital," Connor wrote.

He then told investors how a liquidator had been appointed to wind the company up and complete a final review.

Connor said yesterday that some bondholders had contacted him directly to express distress at the loss of their money.

Browns Bay retiree Russell Walls, who lost $10,000, attacked Guardian for its involvement as trustee and said he was extremely disappointed.

Guardian should never have been involved, Walls complained. He had trusted the business for many years but lost all faith after the Albany scheme.

Westpac poured millions into the Albany scheme on the basis that Albany City Property Investments debt did not exceed 55 per cent of the value of subleasehold interests and other group assets.

Connor refused to specify Westpac loans but said they were "big numbers".

Albany City Property Investments' financial statement for the March 2009 year declare borrowings of $41 million and refer to a Westpac term loan repayable 36 months after the initial drawdown date on December 22, 2006.

"The borrowings are secured by first mortgage over sub-sub leasehold interest properties, the Business Park, Block A1 and G Block, Albany," Albany City Property Investments declared in notes to the accounts.

To price in risk, Westpac was charging 2.5 per cent above the going bank bill rate.

The same financial statements from last year declare a net loss of $96 million and said it was in breach of its financial covenants under its trust deed and in default on borrowings from its banker.

WHO'S WHO

Albany City Property Investments (in liquidation):

Kevin Podmore - St Laurence, chairman
Mike O'Sullivan - St Laurence, an investor
Colin Reynolds - Albany Partners director, an investor
Adam Reynolds - project chief (Colin's son)
Garry Looker - non-executive director
Peter Brook - independent director