Williams Corporation’s $152.4m investor funds: Six-monthly withdrawals extended to annually

Williams Corporation founders Blair Chappell and Matthew Horncastle. Photo/Supplied

Tougher times have prompted New Zealand’s busiest privately-owned residential developer to double timeframes for repaying $152.4 million of investors’ funds.

Christchurch-headquartered Williams Corporation previously allowed six-monthly withdrawals from three funds.

But founders Matthew Horncastle and Blair Chappell wrote to investors this week saying the changing market meant no money would be paid out for a year.

The development business said it needs to keep the money for longer, documentation allows extend timeframes, and it was “prudent” to do so.

Wiliams Corporation Capital, Williams Corporation Capital Partnership and Williams Corporation First Mortgage Investments hold the funds in a type of quasi-bank arrangement, available only to wholesale or qualified investors in schemes.

“This letter is to inform you that we are extending the repayment date for any withdrawals/redemptions in respect of each of the above wholesale finance entities from six months to 12 months pursuant with the relevant investment documentation,” the letter said.

“We have had a period where we could not trade (Covid), New Zealand’s population decreased, New Zealand’s average house price dropped 15-20 per cent and interest rates tripled,” the documents added.

“These adverse market conditions are why we have decided to exercise the extensions clause related to redemptions/withdrawals. We understand that this may cause an inconvenience to investors, in particular those who have requested a withdrawal, however, this in the best interests of all investors.”

Horncastle is a 29-year-old Rolls Royce Wraith-driving, private jet-flying, $4m 87-foot launch-owning, inner-city Christchurch-living developer.

The company has been named by a BCI Central report as second only to the franchised national housebuilder G.J. Gardner.

Williams is the second-largest housebuilder by annual number of homes completed but Horncastle says it’s the biggest privately owned house builder in New Zealand.

A Riccarton project by Williams Corporation. Photo / supplied

He said of keeping the $152.4m funds for longer: “Our current funds’ withdrawal policy is 12 months from date of request pursuant with all the rights in our information memorandums.”

He was making the point that documents allow Williams to double repayment times.

But a quarterly dividend of $3.8m was still being paid to investors, he said, remaining upbeat.

“We have a work in progress of 916 homes. We have 578 unconditionally pre-sold. We have 623 homes under construction. We have delivered 642 homes in a rolling 12 months period. All our creditors are paid on time or early,” he said.

In October, Te Mana Tātai Hokohoko the Financial Markets Authority released findings of its almost year-long investigations into often high-risk property schemes, finding several conduct concerns in wholesale property investment and issuing seven formal warnings.

It named Williams Corporation Capital Partnership GP, Black Robin Equity and Westwood Terraces BRE, Du Val Capital Partners and Du Val BTR GP, E+O Property Syndication, Jasper NZ Investments, Provincia Property Fund and Wolfbrook Capital.

The probe came into property-related offers after more complaints and concerns about how such wholesale offers were being promoted and whether the appropriate investors were being targeted and accepted.

The business has changed lately, with staff numbers reduced from 204 a few months ago, including contractors, to 125 people now.

Blair Chappell and Matthew Horncastle of Williams Corporation charter private jets to move staff around. Photo / Supplied

But Horncastle this week insisted only 30 per cent of staff had been made redundant in a formal process from early November, that was all done on a voluntary basis and people got two full month’s pay.

“We are currently not purchasing land and just focusing on delivery of our sold homes and sales of our available homes. in the last 12 months we have sold 410 homes average 34 houses sold every month.

“Our average construction period is nine months. Our average development cycle is 15 months,” Horncastle said on Friday when asked about extending repayment timeframes.

Others in the industry said the business was showing signs of facing pressure by keeping investors’ funds longer.

The staff reductions were further signs of stress, they said.

The business celebrated its first decade last June. Its founders are both aged 29 and both have the middle name of William, hence the company name.

Horncastle was also reported this week as saying women should use their “youth and beauty” to get the “best possible man”.

In February, the Herald reported on “the great funding crunch” and said Williams had then raised $148.7m from qualified or wholesale investors, with offers going out in New Zealand, Australia and Singapore.

Williams Corporation’s businesses have drawn just under $135m of that to build homes in Auckland, Wellington and Christchurch.

Williams Corporation's work at 14 Nova Pl, Christchurch. Photo / supplied

Apartment or townhouse presales must exceed 70 per cent before building begins, says the 82-page investor information document for Williams Corporation Capital.

Investors who buy into one of the three Williams funding arms purchase redeemable preference shares, with the promise that their money can only be used for Williams’ development, land purchase and building expenses.

Asked then why the funds were established, Horncastle says: “This was done to provide a secure, affordable pipeline of capital so we can consistently build affordable homes.”

And how do investors get their money out?

“If funds are available, we have to pay out immediately,” Horncastle says.

Williams guarantees the money will be repaid in six months “but if 33 per cent of people try to withdraw their funds at the same time, we’re allowed to extend that period to 12 months to allow us to deliver our work in progress safely to our clients,” Horncastle said earlier this year.

Qualifying or wholesale investors must fulfil specific criteria, such as tipping in at least $750,000 or having net assets or turnover of $5m or more in the past two years.

But Horncastle said deposits of $100,000 or lower are taken from qualifying investors who are sophisticated and qualified to buy in.

“Retail” investors with less ready money or less investing experience are barred from Williams’ offers, says the information memorandum.

Last night, Horncastle was telephoned by Fire and Emergency New Zealand, called to a Williams’ development site at 200 Worcester St, Christchurch to deal with an alarm issue.

He said on social media fires were being lit in the area. Two fire trucks were at the site and he thanked the services called out just before midnight.

“Some vandals had come on-site, grabbed the safety net we use, bundled them up in a corner and used stimulants to get the fire going.”

Only 15 to 20 pieces of timber would need to be replaced, he said.