Flames International Hotel of Onerahi has gone into receivership but is still open for business while the receivers look for a buyer.
Owner Laurie Wooding is devastated by the loss of the hotel which had healthy forward bookings.
The former builder says the receivership is the result of a financialchain reaction triggered by a now-bankrupt developer failing to pay Wooding Construction for building the Samuel Marsden Villas in Paihia, despite a court order to pay the $2.8 million owed in progress payments claimed under the Construction Contracts Act.
The losses were compounded by unsuccessful appeals against the court orders over an 18-month period and because he was legally locked into completing the project, but with no prospect of payment.
The hotel receivership was initiated by creditor FM Custodians and actioned by the company's trading arm, the Tauranga-based FM Mortgage Trust, which is described as New Zealand's largest privately owned group investment trust.
The trust has forced the sale of several other properties owned by Laurie and Michele Wooding over the past year. These were sold through different processes but within short timeframes.
Mr Wooding has previously blamed his financial troubles on the recession, saying the economic climate is the worst he has seen in 40 years in the building trade. He will be making a full statement about the progression of events that led to the hotel receivership within the next few weeks.
Flames International Hotel has been on the market for some time at an asking price of about $4 million and Mr Wooding fears a forced sale in receivership will see it sell at a price below its true value.
Receiver Kenneth Brown, of Tauranga firm RHB Chartered Accountants, says he is continuing to use the hotel's existing marketers. One of them, Pete Peeters of Colliers International of Whangarei, says there has been some interest in the property but nothing has come to fruition.
