Heritage Hotel investors lose out

By ANNE GIBSON

Investors in Auckland's Heritage Hotel apartments are about to lose their guaranteed rental returns as the company that owns the units winds up with a projected loss of nearly $3 million.

Heritage Equities, which owns 32 units in the hotel, has written to bond and shareholders who five years ago bought into the company, saying the 9 per cent guaranteed rental return on apartments will expire on September 6.

Heritage Equities directors Robin Seal and Alistair Ward have written to investors saying that the company is no longer viable because of insufficient income. A financial overview sent to bondholders and shareholders shows Heritage Equities is $2,923,000 in the red.

A plea to Heritage Hotel Auckland to negotiate "a reasonable future guaranteed level of return" had been refused.

"There will be significant cashflow shortfalls once the vendor guarantee expires as the anticipated income [at best] would be in the region of half of that at present," the directors wrote. "The company is reliant on the rental stream to meet its current commitments to pay the overheads, bank principal, bank interest and bondholders' interest.

"On this basis, it is expected that the company will default on the bondholders' interest payment due in September."

The deal dates back to when the former Farmers department store was converted into the Heritage Hotel and its developer Symphony Group sold 32 apartments to Heritage Equities, which in turn sold shares and bonds to various investors.

Symphony gave a five-year rental guarantee, which attracted investors to buy shares and bonds in Heritage Equities and get a slice of ownership of the 32 units.

Although the units have risen in value from $7.7 million to $8 million, the directors have decided that now that the rental guarantee is expiring, the best outcome is to sell the apartments and wind up Heritage Equities.

ASB Bank has a $3.8 million first mortgage over the units, they said.

Zena Banks, 84, who with husband Douglas, 94, invested $40,000 in Heritage five years ago, said that despite the rental guarantee the company had been paying only 4.5 per cent since December 2002.

"The whole idea was not a good business arrangement for us," she said. "But I was persuaded against my better judgment.

"Having owned a unit at Surfer's, I know how these things run and I didn't see how they could guarantee a 9 per cent return."

Another Heritage investor, Sir Muir Chilwell, said he expected to lose about half of the $45,000 he had invested in Heritage shares and bonds.

"My feeling is we have to cut our losses," the retired judge said.

Heritage was one of several such property schemes he had invested in.

"I can't say any have been successful."

The $10 million project was promoted by financial planning firm Reeves Moses, and two of its principals - Roger Moses and Gary Stevens - were directors of Heritage Equities.

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