Auckland ratepayers have had a great week.
On Friday Savoy Equities, the developer of the original $1.8 billion Britomart project, announced a loss of $77.1 million for last year and it had remaining shareholder funds of only $1.4 million, or 2.3c a share.
Because of its precarious financial position Savoy will be
unable to sue the Auckland City Council for its termination of the Britomart development.
Protracted litigation would have been expensive for ratepayers, both in terms of legal costs and potential damages. It would also have highlighted the huge degree of commercial naivety among city councillors.
The shocking result confirms that Jihong Lu, the bankrupt driving force behind Savoy, should be avoided if he returns to the listed company scene.
Savoy's projects in China and Australia came to nothing and it made large losses on its Dairy Brands, Hyatt Regency Hotel and technology investments.
In an interim report last October, the company said its forecast net profit of $5 million for the full year "is already substantially realised by transactions to date." This was not achieved.
Why did our city fathers sign a $1.8 billion development deal with a businessman who had no proven ability with large-scale projects?
Finance Minister Michael Cullen also came to the rescue of ratepayers when he said the Crown was taking over the rail corridor lease negotiations with Tranz Rail.
Dr Cullen will receive widespread support for his view that the $112 million price is far too high.
The Government is hoping to buy the basic infrastructure - track, bridges, signals, buildings and tunnels - at a much lower price and lease it back to local authorities.
The original deal is worth 93c a share in cash to Tranz Rail but investors are not concerned about the Government's involvement. The transaction was in doubt because Auckland had committed funding of only $57 million ($35 million from Infrastructure Auckland and $22 million from Transfund).
The deal is more likely to go ahead, albeit at a much lower price, with the Government taking the reins.
But again, why did our city fathers agree to the hugely inflated price of $112 million?
* Jim Watson and biotech group Genesis are a class act.
At last week's annual meeting, chief executive Dr Watson gave a detailed and credible explanation of the phase two trials for its psoriasis vaccine.
Although Genesis operates in a high-risk area and there is no guarantee that it will be a big commercial success, it has far more depth and substance than the fly-by-night technology companies that appeared on the scene last year.
But one has to wonder why the company employs outside public relations assistance when Dr Watson is such an excellent communicator.
* Pacific Retail chairman Maurice Kidd told shareholders at the start of last week's extraordinary general meeting that he would not answer any questions and he stuck to his word.
Mr Kidd claimed that he had enough proxies to pass the motion - Eric Watson owns 63 per cent of the home appliance and electronic retailer - and said the full details of the asset sale to Orion Ventures had been disclosed in PricewaterhouseCoopers' appraisal report.
Stefan Preston, the Pacific Retail director who stood to benefit by up to $450,000 from the deal, did not attend the meeting.
Could this be the beginning of a new trend? Will chairmen refuse to answer questions at annual meetings because they hold proxies for more than 50 per cent of the votes?
Will directors fail to front up to meetings because they might be subject to individual questioning?
* bgaynor@xtra.co.nz
Auckland ratepayers have had a great week.
On Friday Savoy Equities, the developer of the original $1.8 billion Britomart project, announced a loss of $77.1 million for last year and it had remaining shareholder funds of only $1.4 million, or 2.3c a share.
Because of its precarious financial position Savoy will be
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