Hilton Lake Taupo opened as firm was freezing funds

Triumph Capital bought the failed Terraces Hotel in 2008 which subsequently became the Hilton Lake Taupo.

A business related to failed Strategic Finance managed to get a luxury Taupo resort built and opened even as the finance company was freezing funds.

Hilton Lake Taupo opened a few months after Strategic's disaster began to unfold and the business went into moratorium.

Strategic Finance is in receivership, unable to repay 13,000 investors about $417 million. But in 2002 it was offering 11 per cent on four-year fixed terms of a minimum $5000.

Executives at Hilton Lake Taupo said Strategic associate, Triumph Capital, had arranged project funding for the $55 million property expansion which had allowed it to open its second Hilton in New Zealand after Auckland's Princes Wharf.

Companies Office records show Triumph's directors are Strategic consultant Brian Fitzgerald and Strategic executive director Marc Lindale.

Fitzgerald said last year, when Hilton Lake Taupo opened, Triumph had bought the failed business of the Terraces Hotel from receivers KordaMentha in December, 2008 and expanded it so Hilton could run it.

Triumph also sublet offices in Strategic's former headquarters on floors of Shed 22 at Princes Wharf, paying the failed financier $16,725 rent in the June 2008 year, according to accounts.

One of Strategic's biggest loans was to Neville Mahon's Fiji Beach Resorts & Spa managed by Hilton on Denarau Island, which was unable to repay its huge loans after problems expanding it.

Mahon pleaded with Strategic to give him more time and money but two of his businesses there are in receivership. Hilton is still running that hotel, which remains fully operational.

"I'm jammed like meat in a sandwich between Bank of Scotland and Strategic," Mahon complained about his two financiers on that project.

Triumph is not Strategic's only related party.

In its June 2009 accounts, Strategic declared a string of related parties. These were Pioneer Finance, Dockland Holdings, Strategic Advisory, Strategic Mortgages, Strategic Investment Group, Blueline, Wakefield Capital, Wakefield Investment Trust, Allco Strategic Holdings No 3, Allco HIT, HIT Finance, Truman Investments, Quay Street Investments, Strategic Equity Partners and Triumph Capital.

John Fisk, a PricewaterhouseCoopers partner running Strategic's receivership, said on Friday just six Strategic staff members were being retained. These people included a credit manager and and loans manager because they were familiar with Strategic's complicated and poor loan books. He refused to name them.

Most of the 12 employees which Strategic declared in its June, 2009 accounts were on $100,000-plus salaries had already left, Fisk said. Strategic chief executive Kerry Finnigan, on $550,000 annually when the company was in moratorium, has been let go.

Fisk said he had taken calls from desperate investors wanting an indication of recovery but he had told them he could give no assurances. Predictions of payouts, amounts recoverable, full lists of creditors and debtors, investigations of claims which could be made by the business or claims made against it were not yet available, Fisk said.

"There are some complexities to the loan book," Fisk said.

The first official report on Strategic is due on Sunday, May 23, according to Companies Office records.

Strategic was one of the property sector's largest lenders, standing in line behind banks for mezzanine finance to get projects off the ground.

In 2008, Strategic loaned more than half a billion dollars to some of the most risky property projects here, in Australia and Fiji.

By last year, it had cut that back to $326 million but made a $174 million net loss after tax.

MONEY TRAIL

Where Strategic's money went:

* Fiji Beach Resort & Spa managed by Hilton: $75m
* Soho Square, failed Ponsonby project: $69m
* Cornerstone Group's 30-level Sentinel apartment tower
* Gulf Harbour and various high-rise apartment blocks
* Hotels and tourism properties
* Princes Wharf hotel/apartment development