Dunedin property investor Paul Nicholson has forfeited a $1.2 million deposit after failing to settle the balance of $10.8 million on the Bendemeer subdivision near Lake Hayes, in Central Otago.
Mr Nicholson's earlier private investment company, Hurricane House, went into liquidation in early 2009 owing investors $4.2 million.
He started Bendemeer Trustees Ltd in April this year in a bid to secure the subdivision deal, saying he wished to repay Hurricane investors. It is understood there were three investors involved in the Bendemeer bid, including Mr Nicholson.
Mr Nicholson had a sale and purchase agreement in place with receivers PricewaterhouseCoopers, which is handling the $12 million sale of the 24-section Bendemeer subdivision. A more than three-week extension to settle the deal ended yesterday.
When contacted yesterday, receiver Malcolm Hollis confirmed the $10.8 million balance had not been been paid and the non-refundable $1.2 million deposit had been forfeited.
"We've told him there will be no more discussions. It [the deal] is over. We are now talking to a secondary party," Mr Hollis said of another purchaser waiting in the wings.
"It has been a long process but we are confident of getting a successful outcome [sale]," Mr Hollis said.
When contacted yesterday, Mr Nicholson declined to comment, telling the Otago Daily Times to talk to his nominated spokesman and fellow Bendemeer investor Brian Donovan in Christchurch. Mr Donovan did not return calls.
Recently, the title to Mr Nicholson's Dunedin home, which had a rateable value in July last year of $550,000, was taken over by a Wellington-based company.
Throughout the lengthy purchase period of Bendemeer, Mr Nicholson had the backing of a small number of former Hurricane investors, but similarly had a small number of detractors who did not believe he should be attempting to solicit funds again after having lost $4.2 million.
In early 2009, about 25 Hurricane House investors - mainly southern-based friends and family - were owed about $4.2 million after Mr Nicholson lent the money, unusually on an unsecured basis, to a Christchurch finance company.
That company was subsequently placed in liquidation owing about $17 million.
Being unsecured, the investors were at the bottom of the creditors' list, to date having been paid about 12.5c in the dollar by Insolvency Management Ltd of Dunedin.
Emails sent by Mr Nicholson in April, leaked to the Otago Daily Times, contained his curriculum vitae and a business profile. Both omitted to mention his previous private investment company, Hurricane House, had collapsed, owing investors $4.2 million.
In the emails Mr Nicholson offered no prospectus outlining a profile of risk and reward, and instead addressed the emails to "habitual investors", or those whose principal business is investing money.
In early May, despite admitting in an interview to having had a "brain implosion" in lending more than $4 million of Hurricane House funds without security, Mr Nicholson defended his decision to re-enter the property market.
He justified his move to solicit more funds by claiming he wanted to pay back Hurricane House investors still owed money from the company's liquidation "not from a legal obligation but a moral obligation".
Other emails by Mr Nicholson, which were sent in late April, asked "commerce guys/gals" to "help with all or part" by 2pm that day, and another said: "Urgent. Thanks. I need $500,000 today [20% return] due to another party funding delay".
Mr Nicholson also emailed would-be investors concerning the $12 million Bendemeer purchase, saying the subdivision was valued at $20 million in April.
When contacted last week, Mr Donovan said the deal was still being negotiated.
It was "very large and complex and there were some finer negotiations to do".
When asked if he was confident of the deal going through, he said there were "no indications" of "major obstacles".
"Some time this month there should be a resolution."
Concerning the issue of the non-refundable $1.2 million deposit, Mr Donovan said it was "definitely of concern", but whether a deal was "real estate, a house or development like this", there were contractual principles to be taken into account.
He declined to name or reveal the number of investors involved in the deposit, but said there there were "two outside the circle", meaning two were not former Hurricane House investors.
He later said he was also an investor, confirming he had contributed $200,000 to the deposit, describing his stake as "pin money".
The Bendemeer subdivision
In late 2006, the Bendemeer subdivision was understood to be one of the first in the country offering a proportional freehold ownership scheme; touted as being developed with 80 three-bedroomed luxury villas and an exclusive lodge.
The original 130ha Bendemeer subdivision development, near Lake Hayes, has been plagued with financing issues. It came under the control of receiver PricewaterhouseCoopers after the $400 million demise of Strategic Finance and its receivership in March 2010.
Strategic was a lender for Bendemeer which, after a series of different owners, was itself owed $39.5 million when Bendemeer's majority owner Rakaia River Holdings wa placed in receivership in November 2010.
In April 2010, Bendemeer Trustees Ltd of Dunedin paid a non-refundable deposit of $1.2 million to receivers PricewaterhouseCoopers. By late July Bendemeer Trustees had failed to deliver the $10.8 million balance owing on the sale and purchase agreement.
The receivers finished negotiations and the $1.2 million deposit was forfeited. Negotiations were already under way with another potential buyer.
