Poisonous real estate deals brought down South Canterbury Finance. Just like the failed Bridgecorp, Strategic Finance, St Laurence and Hanover, the venom of property's fast-declining fortunes caught SCF offguard and delivered the killer blow.
Bad real estate loans are largely responsible for destroying $6 billion of investors' wealth in the other property financiers - at least until yesterday when South Canterbury lifted the tally to nearly $8 billion.
Despite its reputation for being a South Island-focused rural lender, SCF was exposed to what turned out to be particularly bad deals all over New Zealand, in Australia and even Fiji.
It was exposure about which the usually amiable chief executive Sandy Maier admitted he was worried sick.
He complained about property, admitting that type of lending was to his regret and said it was a diversion from the traditional core business of the once-conservative 84-year-old business which Allan Hubbard controlled via his Southbury Corp.
Maier not only had to deal with the bad dirt deals, but he also had to put out another fire: investors clamouring for their money back.
In April, he embarked on a roadshow to raise an astonishingly big lifeline of $1.25 billion which he desperately needed for SCF to survive. That was to meet a $1 billion wall of expiring maturities and at the time, SCF disclosed that property loans totalled a shocking $414.2 million as at June 30, 2009.
Maier admitted he was not confident that would be repaid and although he always refused to answer precisely where SCF's money was loaned, his prospectus was more informative and more worrying.
That document, issued then withdrawn often as SCF's credit rating slid, revealed that its single biggest loan was a huge $42.3 million "for a large commercial hotel refurbishment and redevelopment".
That had people speculating that the money was lost on Auckland's Hyatt hotel/apartment project, finished some years ago, a property with close South Canterbury links after Savoy developer Jihong Lu quit. Maier hosted investors at the Hyatt at his June roadshow.
John Dalzell, now at Sea+City, recalled being Savoy's chief executive of property, working for Hudson which took over the project "but for the last 2years representing South Canterbury Finance's interests in the Hyatt properties".
The five-star hotel underwent a lavish refurbishment and the Hyatt Residences luxury apartments were developed next door and overseen by Dalzell who lived in the penthouse there.
In 2006, SCF appeared to be quitting, announcing it had a potential Hyatt buyer. Lachie McLeod, then SCF's chief executive, said a buyer had shown interest in the hotel which was worth more than $50 million but no deal was done.
An announcement might be made in early August 2006, McLeod speculated at the time. Sullivan announced in 2007 the hotel was taken off the market.
Maier admitted he was worried about property loans and was "absolutely not confident about getting it all back" but even more sickeningly, SCF was in a largely subordinated position on a large portion of its loans resulting in lenders standing ahead in the line for payouts.
In a particularly pernicious disclosure statement in the small print of its prospectus, SCF revealed how 37 per cent of its loan book was secured "by a second or subsequent ranking mortgage".
Real estate accounted for 207 of SCF's loans with an average net loan value of $1.15 million.
Maier admitted 10 property exposures of $10 million-plus each. SCF even engaged in the awful practice of capitalising loans, allowing borrowers to suspend interest payments until the loan hit full term resulting in nil cash flow.
Even worse, it loaned on planned work and development rather than solid completed bricks and mortar. SCF tried desperately to get property off its loan book.
But it was in a jam, along with all its rivals.
"The company has significantly reduced its lending of this nature in early 2008 but it has been required to continue funding development costs for existing borrowers to enable the completion of projects. SCF intends refocusing its lending operations on traditional business , plant and equipment, consumer and rural lending sectors and only on a capitalised interest basis to the property development sector in very exceptional circumstances," SCF said.
Shunning property came too late for the foundering business.