South Canterbury Finance, desperate to clear the debt-ladden Hyatt Regency hotel controlled by its directors from its books, sought to offload the property to ill-fated developer Neville Mahon.
National Business Review inquiries have also disclosed the $42.3 million hole South Canterbury found itself stuck in through loans for the five-star hotel was dug well before the finance company took ownership of the hotel in 2005.
As receivers inch towards selling the Auckland landmark, other creditors are scrambling to secure their position ahead of the taxpayer-owned South Canterbury.
Mr Mahon made headlines last year when his developments in Fiji’s Denarau Island hit the rocks owing more than $200 million. South Canterbury’s exposure is understood to have been $37.6m.
Sources said Mr Mahon was pressured by South Canterbury to buy the Hyatt in late 2008, and take the growing loan off their hands as the scale of their impaired exposure to Mr Mahon’s Fiji adventures became apparent.
Mr Mahon told NBR he had explored buying the hotel but never took ownership.
“I have never owned the Hyatt hotel. I’ve done work on it with South Canterbury and a lot of work went into seeing if it was viable. But we decided against proceeding,” he said.
In 2007 Mr Mahon talked of spearheading $600m of resort developments in Fiji but he said Auckland’s Hyatt was too expensive for his tastes: “It needed far too much money spent on it, far too much capital – which I simply didn’t have.”
In late 2008 ownership of the Hyatt was shuffled to Hilltop Hotels, a company controlled by Mr Mahon’s business associate and solicitor Gregory Shanahan. Mr Mahon said Mr Shanahan was not acting on his behalf and his involvement with the Hyatt was limited to acting as a consultant to the hotel’s refurbishment.
“It was better to help South Canterbury repackage the thing and get it on the right track,” Mr Mahon said.
Mr Shanahan refused to comment, citing client confidentiality.
Mr Mahon is reported as appearing before Auckland City Council’s planning fixtures committee representing the Hyatt in a dispute over signage in January 2007.
After Mr Mahon refused to take on the hotel ownership of the Hyatt was transferred to South Canterbury director Edward Sullivan’s brother-in-law Peter Symes, as disclosed by NBR two weeks ago.
Losses from 2002
Losses for the finance company began well before Mr Symes and South Canterbury played ownership shell games.
Former South Canterbury chief executive Lachie McLeod told NBR two weeks ago that South Canterbury exposure to the Hyatt was “well-entrenched” before he joined the company in 2003.
Property records show South Canterbury extended second and third mortgages in 2002 to Hyatt’s previous owner, Hudson Auckland Hotels. The first ranking mortgage was held by HSBC.
After Hudson Auckland Hotels defaulted on loans the hotel was put on the market in 2004 and was eventually sold for $48m, less than the $65m sought, to South Canterbury trading vehicle Regency Auckland.
Former South Canterbury director Edward Sullivan refused to answer questions this week about the scale of impaired loans to Hudson Auckland Hotels, or the involvement of Mr Symes.
Jones Lang LaSalle agent marketing the hotel Dean Humphries told NBR a number of parties were shortlisted to purchase the hotel. They are doing due diligence due to be completed in mid-November.
And as sale of the troubled hotel nears, creditors other than South Canterbury have been busy this week shoring up their positions with a view to minimising losses.
In addition to the $42.3m owed to South Canterbury, properties connected with the Hyatt – including a parking building and several of the Hyatt residences – have many other institutions clamouring for loan repayments.
South Canterbury’s interest is secured only by a second mortgage on the hotel proper, with ASB Bank holding first ranking. ASB also holds registered security interests over Regency Operations, the manager of the Hyatt Residences.
The car parking building, bought by companies associated with South Canterbury in 2004 for $4.77m, is subject og a Westpac mortgage – and the bank took aggressive moves this week to further protect their interests.
On Tuesday Westpac increased its level of collateral demands, according to security statements filed with the Companies Office.
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