Post-conversion, Groves shows off a show suite. Photo / Dean Purcell
Post-conversion, Groves shows off a show suite. Photo / Dean Purcell
A new report on the company behind Gary Groves' $250 million The International apartment project in Auckland shows total creditor claims are $125.2m although they were much higher until unit sales reduced part of the debts.
The final administrators' report of Meltzer Mason's Jeff Meltzer and Michael Lamacraft said two secured creditors were left claiming $99m, one preferential creditor claimed $24.2m and 30 unsecured creditors claimed $1.8m.
In the last six months, payments had been made to some creditors since the December appointment: $135m had been owed to secured lenders on December 9 but $34.66m had been paid to them in the half-year, reducing that claimed debt to around $99m.
That $34.66m had come from the net proceeds of further apartment sales between last December and March this year.
In fact, receipts and sales from December 9 to March 15 totalled $41m. So secured creditors got 24c in the dollar so far, the report said.
Preferential creditors, unsecured creditors and deferred creditors got 0c in the dollar.
Meltzer and Lamacraft are also the company's liquidators and their first report on March 22 showed how real estate agents, interior decorating firms and lawyers are claiming money from the failed business, whose sole director is Gary Mervyn Groves.
That March 22 report said the company's total estimated shortfall then was $69,868,820: its debts compared to its assets.
Inland Revenue wants $20,288,420 for GST on apartment sales but there appears little prospect of it being paid because the liquidators say the shortfall matches what is owed.
Auckland Council and Watercare also appear but the report does not disclose how much they are owed.
Bayleys Real Estate, Charta Real Estate, Mint Real Estate, CBRE and Ray White Epsom are listed as unsecured creditors for work on the high-rise project, which had a prominent profile at the time it was being done.
High-rise luxury living at The International, now occupied. Photo / supplied
By far the biggest creditor is Tim Edney's Waimauri Ltd, which has first ranking security over debt shown in the liquidators' statement of affairs as $87.4m.
That amount is offset by some assets so the final shortfall to Waimauri appeared in the March 22 report as $36m. The offset comes from an estimated realisation from unsold units in The International, which the liquidators put at $51.3m.
Groves engaged Dominion Constructors to convert 9 Princes St into luxury apartments in a $250m job and Donald Trump ex-aide Chris Liddell was said to have bought an apartment there for around $15m.
However, a recent title check showed the penthouse was still owned by a Groves' business.
The Bank of New Zealand was owed $6.5m but has been repaid, and when the Sanctuary business went into voluntary administration, Meltzer said there were no subcontractors owed any money because builder Dominion Constructors had also been paid in order to ensure they would continue with warranties.
"Sanctuary has no outstanding financial obligation or dispute with the builder Dominion Constructors and will focus on outstanding invoices from December 2020 onwards," the statement said.
At the time of liquidation, creditor Chao Ming Cheng was also going to the High Court to liquidate the company. But because the liquidation had already occurred, that application was dismissed, Meltzer Mason's report said.
J. Chen is listed as claiming $11.6m.
Once Fonterra's offices, now inner-city apartments with luxury fitouts. Photo / supplied
All up, the estimated total shortfall to secured creditors is expected to be $47m before interest and costs, while the estimated shortfall to unsecured creditors is estimated to be $22.1m, resulting in the total expected losses to all those parties as $69.8m.
Accountant Anthony Appleton-Tattersall fears the taxpayer will be left unpaid by several million dollars and others would also suffer.
"The chances of them getting anything back are effectively zero, with a significant shortfall for even the secured creditors. It's not a great situation for anyone, but just the nature of the game that some ventures fail," he said.
Inland Revenue has refused to comment on the case.
Gary Groves of Sanctuary Group, pre-conversion. Photo / Greg Bowker
In February, Groves issued a statement via PR firm Hustle and Bustle.
"As with many construction projects such as Commercial Bay and the Park Hyatt Hotel, unforeseen construction disruptions and Covid-19-related delays have been overcome, however, these delays have added significant costs. It has become clear that there will be a shortfall to pay off secured and unsecured creditors," the Sanctuary statement said.
In 2017, the Herald reported Groves saying: "We're building this project to a standard that Auckland has not seen before. We're appealing to people who have previously lived in large, quality suburban homes."
Groves, in the sector for 25 years, said he had developed more than 1000 apartments. The biggest project was a 314-unit Whitaker Place block, finished eight years ago, but he has concerns about his sector and project cancellations.
"There are inexperienced developers involved at the moment and it's one of the reasons for apartment projects not going ahead. Also, restrictive lending covenants with the banks and prices increasing for construction are other factors," Groves said in 2017.
Asked in 2017 if construction costs might rise at The International, Groves said that was "a moving target, but we have bank funding".
