A crippling $41 million loss for investors in a property syndicate-style scheme has prompted a shareholder advocate to sue a company and directors who sold shares to fund the failed West Auckland homeware shop Nido.
CNP Holdings, whose director is Aucklander Craig Priscott, has lodged a legal claim against those who raised money to fund what was to be New Zealand’s biggest furniture and homeware store, which shut in 2021 only a few months after opening.
Around $62m was raised, and at least one investor claimed to have lost more than $1m and complained to the Financial Markets Authority.
Many investors bought shares in various businesses, including Central Park Property Investment, which last week filed its financial statements for the year to March 31, 2023.
The company revealed the court action in notes to the accounts, which were posted on the Companies Office website.
In April, CNP Holdings “commenced proceedings against Central Park Property Investment, Maat Consulting, their directors and certain employees, alleging breaches of the Financial Markets Conduct Act 2013 in relation to the Nido development”, said the accounts signed by two directors.
The annual statements, signed by Maat Consulting’s two directors Neil Tuffin and Mark Hughson, who are also Central Park directors, stressed that Priscott’s company wasn’t a shareholder in the Nido vehicle.
“CNP has never owned shares in Central Park Property Investment Limited and admits that it suffered no loss in the Nido Investment. Nevertheless, CNP seeks a declaration of breach and compensation for certain investors in Central Park Property Investment. All defendants are defending the proceedings. A trial is likely to be over a year away. All legal fees incurred will be covered by other parties to the claim,” the statement said.
Priscott told the Herald this week he was taking the action for good reason.
“When the Nido development failed, Maat investors lost more than 85 per cent of their capital. This was an extraordinarily high loss for a New Zealand commercial property syndication and a source of considerable distress for the investors concerned,” he claimed.
He said the essence of CNP’s legal claim was an allegation of the failure to disclose all material information to investors during the capital raising process, for which Priscott claimed Maat had offered CNP no credible explanation to date.
“CNP is confident its claim has merit. CNP and other entities with which I am associated have a track record of investor activism and improved outcomes for investors. CNP will not hesitate to call out directors or managers for their governance failings when it is appropriate to do so,” Priscott said.
Asked for additional comment on the lawsuit, Maat’s Tuffin asked why Priscott was bringing the claim when he never owned shares.
“We are confident the proceedings are without merit. We look forward to being vindicated through the court process. Unfortunately, our lawyers advise that we’re unable to disclose the pleadings,” Tuffin said this week.
In 2021, Tuffin expressed regret about investor losses. He confirmed investors’ return would be only 14.1 per cent of their original capital invested. They will lose 87 per cent of their money, he said then.
In 2020, the Herald reported concerns from retired farmers who contributed some of the millions poured into a proportional share ownership scheme to buy the Nido homeware store.
Two ex-farmers in their late 70s and mid-80s from the Hāwera and New Plymouth areas then expressed concerns about their approximately $1m investments each into Nido.
Nido was founded by ex-Mitre 10 Mega owner Vinod Kumar, and around $62m was raised to fund it in a syndication-style scheme by Central Park Property Investment, which owned the Nido store.
The Nido store was built on land paid for with $30m raised by Maat Consulting through a proportional share ownership scheme and $25m of debt from Pearlfisher Capital, a non-bank lender half-owned by investment bank Jarden. Another $7.5m came from Kumar as the vendor of the property and ultimate tenant.
The investors were once enjoying $5000 per month returns from Magsons Hardware (trading as Nido) as the tenant, with returns pegged at 8.5 per cent.
But the store’s builder’s collapse left them wondering how safe their money was. Investors got some money back, but little compared to what they paid.
Then, the homeware business collapsed into receivership and the big store in Henderson was sold.
Central Assets Investment, headquartered at the offices of Maat Consulting at Albany, managed the $62m financial offer.
Directors of Central Assets are Bruce Charles Ellis of New Plymouth, Mark Geoffrey Hughson of Hāwera and Neil James Tuffin of Whanganui.
Nido opened during the pandemic, which created acute pressure on the financial success of the store, the Herald reported in 2021.
Priscott has advocated for shareholders in a number of businesses over the years, including in 2020, when Swedish giant EQT mounted its takeover for Metlifecare. He sought more information on the offer and argued for a higher payout to investors.
This year, Priscott has also been involved in a case where three Nelson property companies with assets worth $60m-plus are suing their former management and directors for nearly $4m.
Anne Gibson has been the Herald’s property editor for 23 years, has won many awards, written books and covered property extensively here and overseas.