Claims of losses by southern investors have hit more than $1 million.
Neither fund manager, Britannia Management of Dunedin, lenders Heartland New Zealand, nor fund trustee Perpetual Trust, would reveal the size of the debt, but an industry source said it was most of a $7.55 million loan going back at least six years.
Victoria, which had earlier dealt in buying and leasing commercial properties, became involved in real estate development by buying for $5.25 million land for a light industrial subdivision in Richmond, near Nelson, which became mired in cost overruns and construction delays of an extra two years.
Lender Heartland declined in April to roll over the loan and asked for payment, prompting fund manager Britannia Management, at the behest of the trustees, to tell investors in early May they were "highly unlikely" to get any return of funds.
The Richmond property was financed with loans from CBS Canterbury, which first appear on the books of Victoria Properties Consolidated Ltd, in its full-year to March 2006 statements. The Victoria fund owns 97.3% of Victoria Properties Consolidated. One loan, for $1.59 million, appears to have been made by the Ashburton Building Society at least a year earlier, then appears as a CBS loan in 2006 alongside four other CBS loans; of $4.3 million, $1.5 million, $372,560 and $300,000. The five CBS loans totalled $7.55 million and were secured by first charge registered mortgages over properties in Christchurch, Tauranga, Porirua, and Lower Queen St, in Richmond.
There is no breakdown in the full-year report of where each CBS loan lay, but the Richmond property purchase of about $5.4 million is noted, as is its "current valuation" of $7 million, which is formally on the books.
Also noted is a "valuation" of $18.1 million, if rezoned to bulk retail.
Heartland took over the loan last year, following the merger of several small lenders, including CBS.
There was a note in the report of a "negative impact" because of an increase in "disposal costs allowance" of $208,000 because of the Richmond purchase.
While saying the company was moving towards being more active in asset management, that meant decreasing the number of income yielding properties in favour of properties where "significant value can be created" in the medium term.
"The costs of holding non-income producing assets has resulted in ongoing operating deficits," the 2006 report said.
Consolidated had booked a $142,000 loss that financial year, following a $690,000 loss the previous year, 2005.
The Victoria fund was established in December 2005, where one-for-one shares in Victoria Consolidated became 'units' in Victoria, managed by Britannia.
Victoria's fund managers, Dunedin-based Britannia Management Ltd, have declined to be interviewed repeatedly or reveal the extent of investor losses, but 17 investors have contacted the Otago Daily Times during the past fortnight and have claimed combined losses amounting to more than $1 million.
Most investors spoken to are retirees who invested in the Victoria property fund, as a small part of a wider portfolio, held with Myles Wealth Planning or later NZ Funds Private Wealth, whose director is Craig Myles, also a director of Britannia.
Mr Myles and a spokesman for Victoria fund's trustees Perpetual Trust were emailed questions yesterday, asking of the extent of losses, what refinancing attempts were made and whether the fund was unable to service any other loans. Mr Myles did not respond.
Perpetual said it would not comment as its role was "overseeing the trust deed and its responsibility to investors is to communicate directly with them around that".
Mr Myles has previously told investors if Heartland forced its clear claim to a mortgagee sale, it would result in the land "being sold below its market value".
However, an industry source claimed that even if the sales were made at market value, there would still be no funds left over for investors.
Eight sections are still for sale in the Richmond subdivision. There has been some recent interest, and the source understood Heartland would not make a move to mortgagee sale until a High Court case disputing two earlier section sales was resolved, in coming weeks.
• Investors in the Victoria Property Fund can contact Simon Hartley, in confidence, at simon.hartley@odt.co.nz, or direct dial (03) 479-3527.
