Struggling Allied Farmers says it has settled the about NZ$27 million sale of stage two of Queenstown's Five Mile property development early and has used proceeds received to cut its term debt with Westpac to NZ$5.4 million from NZ$14.2 million.
(Updates add paragraph on additional bank borrowings following Allied Farmers' annual results, rise in Allied Farmers' share price & background on Hanover deal).
Allied Farmers said its Westpac debt would reduce further next week when it receives NZ$3.5 million from a Californian court settlement.
Allied Farmers managing director Rob Alloway said combined, the Five Mile settlement and money from the US court judgment, would bring the company's senior term debt down below NZ$2 million.
Auckland property developer Tony Gapes' Queenstown Gateway is buying the 23.4 hectare stage two of the Five Mile site from Allied Farmers for about NZ$27 million. Gapes exercised an option on the site after earlier buying the 7.7 hectare Five Mile stage one site. Both Gapes and Alloway have declined to comment on how Gapes is financing the purchase of stage two saying the arrangements are confidential.
Uno Finance has a prior charge of NZ$9.3 million on stage two of Five Mile and will therefore pocket NZ$9.3 million of the sales proceeds. The sale had been due to settle in November.
The Five Mile property was once owned by Christchurch property developer, Dave Henderson, who through Five Mile Holdings Limited, revealed plans to build a boutique town centre and residential development on the site. It was originally designed to house 10,000 people in a “Tuscan style” villa/apartment development near the Queenstown airport.
Hundreds of millions was due to be spent on the development, which was touted as a NZ$2 billion project once completed. However, Five Mile Holdings Limited was placed into receivership by Hanover Finance in July 2008.
Through subsidiary 5M No.2 Limited, Allied Farmers acquired 23.2 hectares of the original development following a restructure of the asset by Hanover last November that saw it taken out of receivership. Allied Farmers acquired Hanover's finance and loan book last December.
Allied Farmers' US court judgment covers a luxury development in Beverly Hills that was financed in part by Hanover. The judgment follows a long running legal dispute with Pacific Northstar Property Group, headed by property developer Mark Cooper.
More debt; shares rise
Allied Farmers' unaudited annual accounts show NZ$44.3 million of additional borrowings secured over property assets acquired from Hanover and sister company United Finance.
Allied acquired the Hanover group's finance interests through a shares for debentures swap valued at NZ$396.2 million. It has since slashed the carrying value of these assets by 69% to just NZ$124 million. The deal saw some 16,400 Hanover Group investors issued 1.9 billion Allied shares valued at 20.7 cents each.
Allied Farmers shares closed up 0.7 cent, or 26%, at 3.4 cents on Friday.