The company developing the $300 million Fiji Beach Resort & Spa managed by Hilton says it is on the verge of going into receivership.
Neville Mahon, Auckland-based developer of the huge luxury property, has written to villa owners saying receivership of Denarau Investments is imminent.
Bank Of Scotland (BoS) and Auckland finance company Strategic had funded the project. Mahon says he has been unable to pay dozens of investors who bought villas at his Hilton Denarau Island project, planned to be eventually expanded and called Fiji Hilton.
Investors are owed $1.2 million for last-quarter 2008 payments and have been complaining for months but Mahon told them he had funding problems.
BoS had provided a $45 million loan facility and taken over the first mortgage from Strategic Finance, he said. He wanted to pay Strategic $55 million over four years but needed an extra $14 million to keep going.
"There are virtually no investors or financiers willing to invest or lend into Fiji," Mahon said.
He has been developing the property throughout this decade and the Hilton has been running it for some years. By 2007, the hotel had 240 rooms and 150 villas operating and Mahon had expansion plans to make the resort Fiji's best.
Now, he said his future is uncertain.
"Both Gregory Shanahan from this office and I have worked tirelessly since January to try and negotiate a solution. No one wins out of a receivership apart from incurring huge fees. So this is very much a last resort given I have dedicated 12 years of my life, at some times exclusively, it comes with great regret," Mahon said yesterday.
Mahon said he had done all he could and receivership was the only option.
Fiji's military coup in 2006 resulted in the resort struggling to make ends meet and hotel occupancy plummeting, he said. Lower room occupancies and room rates, the need to honour guaranteed payments to owners and the expenses of running the resort meant income sank, he said.
Mahon is the head of Greenlane-based Lausanne Project Management.
Villa buyers came mainly from Auckland and Christchurch, he said, but Australians have also bought. In 2007, properties at the resort were fetching $460,000 to $4 million.
Strategic in moratorium but in July said debenture holders would get all their money back despite its loan book souring further in the six months to June.
Strategic chief executive Kerry Finnigan said yesterday his firm had loaned $75 million to Mahon for Fiji's Hilton and the funder was just protecting its interests. "The long and short of it is that it was his project that has had a cost blowout," he said.
BIDS FOR MOMI BAY BUT NO SALE
The partly built Momi Bay resort in Fiji failed to sell under the hammer yesterday.
The luxury resort, which was financier Bridgecorp's largest project, was passed in at just over $40 million.
Scott Cordes, a Bayleys spokesman, said late yesterday afternoon that negotiations were continuing after the auction at Bayleys' Fiji office at 1.30pm yesterday.
Bidding opened at $30 million and paused at $35 million for negotiations, Cordes said. Bidding then continued from $41 million.
"After that, bidding paused for negotiations with the highest bidder," Cordes said.
At least two bidders were at the auction and he said he expected negotiations to result in a sale but this might take some time.