Serious Fraud Office alerted and property syndicate's former director's assets frozen
Tuesday, 9 October 2018
Alleged 'accounting anomalies' has seen a High Court judge freeze the assets of a former director of three property syndicates which own millions of dollars of commercial property, including a high-profile Auckland high-rise.
Neil Barnes resigned his directorships of three property syndicates, First NZ Properties, Superstore Properties and Springs Road Property in February and March.
First NZ Properties owns 110 Symonds Street in downtown Auckland, purchased for $29 million in 2012 with a current valuation of $34m, Superstore owns a The Warehouse property in Tauranga and a Placemakers in Christchurch, and Springs Road owns a property in East Tamaki.
Property syndicates allow numerous shareholders to own a slice of big property portfolios. FIrst NZ Properties has 367 shareholders and the other two syndicates have a similar number each.
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In a September 20 judgment, High Court justice David Collins ruled there was a 'good arguable' case justifying the granting of a freezing order of Barnes' assets after action was taken by Nelson-based Investment Services which manages the syndicates.
The property syndicates were named as plaintiffs.
'There are also sound reasons for the application being made without notice. Putting the defendant on notice would generate a risk of dissipation of the funds and the assets that are sought to be frozen,' the judge said.
Barnes was given an opportunity to challenge the order on five days' notice before it expired on October 20.
Barnes declined to comment when telephoned. He had also provided consultancy services through a company called Activa Consulting.
Investment Services chairman Paul Mephan posted a letter to investors telling them he had called in the Serious Fraud Office after allegedly discovering 'significant accounting anomalies'.
'It goes without saying we were shocked and disappointed to have uncovered this and we are doing everything within our power to resolve this situation as soon as possible,' Mephan said.
In his letter to investors, Mephan said his team had 'urgently' investigated the alleged historical payment anomalies over 48 hours and then contacted the SFO, 'and obtained orders to freeze the assets of the individual who is no longer working for the company'.
'The board is now working as quickly as we can to determine the precise quantum involved and how to recoup those amounts as quickly and efficiently as possible.
'At this time we are confident we can reassure you that your investment is not at risk,' Mephan said. He told Stuff the accounting anomalies involved tax.
Investment Services has suspended dividend payments in the meantime.
First NZ Properties owns buildings at 15 Sheffield Crescent, Christchurch tenanted by NZ Yarn, and 110 Symonds St, Auckland with several office tenants. It has 367 shareholders. Sheffield Crescent has a valuation of $11.34m.
First NZ Properties 2018 annual report showed sales of shares in the syndicate priced at $4.70, with total annual dividends of 40c per share.
Activa Consulting, of which Barnes is sole director and shareholder, was paid more than $26,000 by First NZ Properties the 2017 annual report shows.
The Companies Office shows Activa is overdue on filing its annual returns and the registrar intends to remove it from the company register.
Superstore Properties owns a The Warehouse in Tauranga on Carmen Rd (valuation about $12.6m) and a Placemakers in Christchurch (valuation $8.4m), and has 380 shareholders.
Superstore paid Barnes' Acitva Consulting a further $26,000 in consultancy fees, its 2018 annual report showed.
He was not paid directors' fees.
Springs Rd Property owns a building in East Tamaki, Auckland leased to Manukau Health, and has 116 shareholders.
The Serious Fraud Office declined to comment.