Major Rotorua development stalls over funding

ON HOLD: An aerial view of Gray's Funeral Services site. PHOTO/STEPHEN PARKER 160614SP7

A major Rotorua development has stalled due to lack of funds, forcing one business to close and leaving local contractors and suppliers out of pocket.

Work is suspended on the Gray's Funeral Services site, alongside Kauae Cemetery on Ngongotaha Rd, after overruns added $1.9 million to the original $1.38 million budget for the project.

The 1.72ha complex, designed as Rotorua's largest privately-owned funeral home, was due to open in May last year but has been beset by problems since development began in October 2012.

The site, with 80 per cent of the development completed, has been idle for five months.

Gray's Funeral Services director Richard Bennison explained the reasons behind the site closure and attempts to pay creditors in an email to the Rotorua Daily Post.

In February, Mr Bennison had warned creditors and contractors the project had run considerably over the original cost due to issues with his previous builder.

That builder has since told the Rotorua Daily Post his work was done in accordance to architects' plans, the issue was now in his lawyers' hands and he was unable to make any further comment.

In the email to the Rotorua Daily Post, Mr Bennison said legal wrangles had stalled the project for 20 weeks.

He also listed contingency cost overruns, council, engineers, surveyors, project manager, traffic management, roading authorities, and legal and accountancy fees.

The Christmas holiday period had also slowed payments to creditors but Gray's "were sincerely and honestly" getting the funding together, he said in the email.

Mr Bennison also blamed the Bank of New Zealand for the hold-up.

He said the bank had assured him it would extend the $1.38 million loan if he sold personal assets to pay creditors.

Mr Bennison confirmed his family trust sold two properties, including one in Matamata for $220,000.

But the money was used instead to reduce the loan, and not to pay creditors, he said.

Mr Bennison added that the 50-year "exclusive use" lease between landowners Ngati Whakaue and Gray's did not allow the bank to sell any assets from the complex.

Ngati Whakaue Tribal Lands general manager Tina Ngatai could not be contacted for comment. It would now cost a further $1.9 million to complete the project and pay out all creditors, Mr Bennison said in the email.

He asked for all involved to "persevere with us until this situation is resolved".

"We know this doesn't help you [contractors/creditors] but we are doing our utmost to get a deal where all creditors are paid and the project carries on."

A local tradesman, who did not wish to be named, said he had closed down due to the payment delays.

He had turned down contracts worth $80,000 after being promised ongoing work at the Gray's site after New Year, he said.

A lot of contractors had been "squeezed" by the site closure, he said.

"It's not a good look for Rotorua."

Mr Bennison told the Rotorua Daily Post the company was meeting with lawyers, Ngati Whakaue and BNZ to repay creditors.

Gray's had put a lot of thought and planning into the complex, which when finished would be a huge asset to Rotorua, he said.

"Gray's Funeral Services really wants to find a positive outcome.

"If the project collapsed, or the company was liquidated, no-one would get paid.

"It's bloody awful at the moment."

A BNZ spokesperson said the bank was unable to comment due to client confidentiality.