Empty-handed Metropolis investors wait

By ANNE GIBSON property editor

Auckland property developer Andrew Krukziener, having defaulted on $21 million of bonds, will shortly unveil a scheme to repay the bond holders who invested in his Metropolis skyscraper.

Although under wraps, it is understood that a draft deal involves Mr Krukziener's retaining the money for a further three years and paying out only a portion of the 14 per cent originally promised to investors.

Investors, many of them retired and depending on the money, could be paid as little as 7 per cent interest on the money they invested from September 1998 until May 20 this year, and only 5 per cent for the next three years.

Pacific Properties (Metropolis) was due to repay the $21 million invested yesterday, as well as 14 per cent interest on maturity date. That was the first day of business, following the May 20 deadline, on which the deal could have been transacted.

But Mr Krukziener said early this month that lack of apartment sales and a quiet leasing market had forced him to restructure the deal, resulting in investors not being paid out on time. He asked for more time to find a solution.

Bond holders are expected to receive the final plan by the end of this week. They will be called to a meeting to vote on the proposal about 14 days after receiving the notice. For the new plan to proceed, 75 per cent of the bond holders must agree to the terms and conditions.

Financial planners and advisers Money Managers promoted the bonds to their clients, and the majority of the Metropolis investors are clients of Money Managers.

Money Managers managing director Doug Somers-Edgar said yesterday that the deal was being worked on. Asked when the plan would be revealed, he said: "I would have thought this week."

He refused to say what rate of interest would be paid to bond holders, saying it depended on how much the properties sold for. He also said a meeting would be called about a fortnight after bond holders were informed of the new deal.

"But the media is trying to create some sense of urgency here and it's nothing like that. We've been working on this since September."

The trustee for bond holders, Tower Trust, has received a two-page draft rescue plan from Pacific Properties (Metropolis).

Tower Trust general manager Glenn Clark said he could not reveal the details of the proposal because it would be unfair to bond holders. He expressed concerns for the investors' money, the way the deal was proceeding and the involvement of some parties.

Money Managers was in the role of bond promoter and bond issuer, and was now being involved in the refinancing deal, Mr Clark said.

"We have some concerns as trustee for the bond holders," Mr Clark said.

Tower Trust had been worried about apartment sales at Metropolis before Christmas, but was unable to make any comments publicly: "We watch the property market carefully and as most people would have seen, there was a very big downturn for luxury apartments like Metropolis, so naturally we were concerned.

"We were encouraging Mr Krukziener to refinance. But saying anything sooner might have prejudiced further sales and might have prejudiced the bond holders' chances of being repaid."

By the beginning of May, Mr Clark said he had no option but to warn bond holders about potential problems. He said he could make further comments on the new deal once bond holders had received the proposal.

Mr Krukziener was unavailable for comment yesterday.