Unit owners join forces over rent

Most of the rooms in Wellington's Holiday Inn were sold to individual investors. Photo / Supplied

Overseas investors owed rental income on rooms in Wellington's $100 million Holiday Inn are joining forces with a New Zealand group to try to get their money back.

Most of the hotel's 280 units were sold to individual investors, many from as far afield as the United States, Singapore, Malaysia and Australia.

Last year investment manager Galway Tourism Investment Group, part of Nigel McKenna's Melview group which developed the hotel, suspended guaranteed rental payments to investors citing hard economic times.

Since then it has made payments based only on the income generated by the occupancy of the individual rooms.

Roger Chapman, a Wellington lawyer who is acting for a group of investors, said this had left them out of pocket.

"As far as I'm aware there are still substantial arrears owing."

Over the holidays he had received instructions from a large number of Australian investors in particular, he said. He estimated the total number of investors involved in the group at about 70.

The group had "a number of irons in the fire", he said.

One Chicago investor told the Herald he bought four rooms in the hotel in 2004. "I thought it was a reliable investment because Holiday Inn is a world-renowned company."

In 2008 the guaranteed rent payments started to become erratic. In June last year Galway began paying what it termed "real income" from the rooms, which was not enough to cover his mortgages on the units.

"How do they calculate this amount? I don't know. I have tried to clarify it, I didn't get an answer. It's absolutely not acceptable."

Instead of a "peaceful and comfortable" retirement he was losing money as he struggled to keep up with the mortgages, the investor said.

Director of hotels for Galway, Paul Evans, said the company had written to all investors on December 29 advising them it was working with its funders on a rental arrears proposal.

The proposal was complicated and room-specific, and he could not go into details before matters were finalised.

"We are working very hard on it, we know it's a tough time."

Holiday Inn was doing well in its sector but the market was depressed.

However the outlook was brighter, particularly for 2011 when it already had bookings for the Rugby World Cup, and the hotel hoped to triple returns.

The Melview company which developed the hotel was placed in receivership and liquidation in November, owing construction firm Fletcher Building $900,000.

This follows the receivership in May of two McKenna companies developing the $1 billion Kawarau Falls project in Queenstown.

Lender BOS International (Australia) is owed $117 million.