Why Bluestone wants to spend NZ$500 mln on distressed NZ property assets

Why Bluestone wants to spend NZ$500 mln on distressed NZ property assets

Fresh from bailing out Irongate Properties with a NZ$45 million loan, Bluestone Group’s CEO wants to do more deals in New Zealand's bombed out property finance sector with the NZ$500 million burning a hole in his pocket.

Owned by institutional investors including Crescent Capital Partners and Barclays Bank, Bluestone has operations in Britain, Australia and Christchurch. It was founded in 2000 and entered the New Zealand market in 2003 as a residential mortgage lender. After branching out into commercial lending, loan services and asset management upon the onset of the Global Financial Crisis, the company bought finance receivable ledgers from Provincal Finance’s receiver PricewaterhouseCoopers in 2008.

It also revealed plans this month to lend the Kevin Podmore chaired Irongate money to enable the property manager to repay retail bondholders about NZ$30 million.

Bluestone’s CEO Peter McGuinness told interest.co.nz his company is also “actively working on” a number of further opportunities in the New Zealand finance company sector.

“We’ve got the capability of doing several Irongate equivalent deals in New Zealand. The capital that we’re able to arrange would be in excess of NZ$500 million, should the opportunities arise.”

Bluestone’s focus was on property lending, development loans and consumer assets, he added, declining to name any of the specific companies or assets it was looking at or might be interested in.

There are several opportunities that might tickle Bluestone’s fancy.

The receivers of Strategic Finance and St Laurence - PricewaterhouseCoopers and Deloitte - are looking at selling the two collapsed property finance lenders’ loan books. Then there’s Allied Farmers, struggling under the weight of the Hanover Finance loans and property interests it acquired last December alongside its finance company subsidiary Allied Nationwide Finance, which also needs capital.

There’s also South Canterbury Finance, which CEO Sandy Maier says needs about NZ$180 million of fresh equity by the end of August to bring it in line with its trust deed.

Bluestone’s NZ$500 million odd would come from the Minneapolis-based Varde Partners, which also backed its Provincial Finance and Irongate deals. Varde’s website describes it as a privately owned investment adviser specializing in alternative investments. Founded in 1993 Varde takes its name from the Swedish word for value. It describes its expertise as being in credit, distressed and special situation investing in a wide range of assets such as consumer loans, real estate and corporate securities.

“They (Varde) are a US$7 billion fund who have recently closed a new fund raising and are very, very committed to the Asia-Pacific region,” says McGuinness.

“And New Zealand is a country which ranks right at the top of their priority (list) for the region.”

Bluestone registered a new company with the Companies Office this month – Bluestone Asset Management NZ Limited – which McGuinness said would be responsible for managing investment in local assets.

The company already has 15 New Zealand staff based in Christchurch, led by former ANZ, Macquarie and HSBC banker Steve Martinelli, overseeing the Provincial Finance business it acquired and about NZ$250 million worth of mortgages. McGuinness said Bluestone was now looking to hire at least another six to eight staff with expertise in property development, funds management and loan recoveries.

Ultimately it was looking to build a “broad team capable of handling a challenging loan portfolio” with the new staff to be based in Christchurch and Auckland.

“We’re building a team at the moment and we’ve got a capital partner who is keen to put further investment out into the sector,” McGuinness said. “We believe that there’s an opportunity over the next 12-24 months to unlock some of these opportunities which are really frozen in time because the access to retail funding has dried up.”

The key to turning around troubled, or in receivership, property assets, was access to new capital, reducing debt and having a skilled and well resourced team to manage them out of the quagmire.

“Then, absolutely, there’s no reason those (property) assets shouldn’t come back in value.”

A total of 59 finance companies, investment funds and mortgage trusts have been frozen, closed, have collapsed or been put into receivership or liquidated since early 2006, according to the Deep Freeze list compiled by Interest.co.nz More than 200,000 investors have been affected with the amount of money frozen or lost at NZ$6.802 billion.

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and me i was on holiday...