The private Dunedin-based Victoria Property Fund grew from investment companies which merged in the late-1990s, investing in mainly commercial properties around the South Island once valued at more than $15 million.
The fund's manager, Britannia Management Ltd, whose co-directors are Dunedin-based financial adviser Craig Myles and Roger Bridge, told Victoria's investors in a letter last week that it was "highly unlikely" they would receive any return on their investment in Victoria; which of late was likely to be worth only a fraction of its establishment value.
The Victoria fund, valued at inception at $15.02 million, now has one property in Richmond near Nelson, where mortgage holder Heartland New Zealand is demanding loan repayment and could exercise its rights to sell and take the proceeds of a mortgagee sale, leaving investors out of pocket.
Mr Bridge and Mr Myles are central to the Victoria fund, the latter at present director of NZ Funds Private Wealth and earlier the principal of Myles Planning Ltd and six other companies.
The pair are directors of Victoria Properties Consolidated Ltd, an investment company first incorporated in April 1997, which sprang from the amalgamation of two other companies, Victoria Properties Ltd and Iversen Investments Ltd, of which they were both co-directors, according to Companies Office records.
The new Victoria Properties Consolidated had 5,009,922 shares, which are held by Perpetual Trust Ltd in Dunedin.
In March 2000, Victoria Properties Consolidated released a prospectus, to issue A-class shares, seeking to raise about $300,000, each share costing 97c. Victoria Properties Consolidated also had two subsidiary investment companies; Vicsen Holdings Ltd and Barnwood Holdings Ltd, whose assets were respectively units in Christchurch and two Christchurch properties - both sharing Mr Myles and Mr Bridge as co-directors.
Victoria Properties Consolidated's asset portfolio totalled 13 mainly small to medium-sized, tenanted industrial properties, including in Christchurch (9) and Auckland (1).
"The cumulative values of the real estate owned by the Company [Victoria Properties Consolidated] and its related companies is currently $12.38 million," the 2000 prospectus said.
As co-directors, the pair said in the prospectus their properties offered "comparative yield premium over bank deposits of 5% plus per annum".
The cash being sought in the issue would "primarily be [for] the ability to reduce the level of debt", held by Victoria Properties Consolidated.
A management agreement was in place in 1998 between Victoria Properties Consolidated and Associated Financial Services Ltd, later sold to the pair's Dunedin-based Britannia Management Ltd in October 1999.
Britannia managed all the property portfolio, its administration and management, including all the subsidiary companies.
For the year ended December 1999, Victoria Properties Consolidated received $708,000 in mainly rental income, and after costs of more than $570,0000 booked an after-tax profit of $129,000.
It had $11.28 million in assets and liabilities of $6.9 million.
In December 2005, the Victoria Property Fund was established and began operating in April 2006, after acquiring 97.3% of the shares of Victoria Properties Consolidated Ltd, which at the time had total assets of $15.02 million, and liabilities of $7.86 million, a statement of its financial position to the end of March 2006 shows. Losses for 2005 and 2006 combined to more than $833,000.
A Victoria Property Fund prospectus was launched in September 2006, a copy of which is lodged with Britannia Management's records.
Britannia as manager was entitled to a base fee of 1.75% of the fund's gross value; with a minimum annual $275,000 fee payable.
The cost of each unit in the Victoria fund and subsequently how much was being sought is not made clear in the prospectus, other than the unit price would be equal to a value of a share in Victoria Properties Consolidated; with no maximum number of units.
As of March 2006, Victoria Properties Consolidated had $15 million in assets, with total liabilities of $7.86 million, primarily tied up in $7.55 million of loans.
Eight loans at the time were to Ashburton Building Society (3) and CBS Canterbury (5) of which the largest was to CBS for $4.3 million - all secured by first-charge registered mortgages over properties. A CBS loan was inherited by merger with entity Heartland New Zealand last year, which is due.
