Newsroom special investigation: Once dubbed one of NZ’s most ambitious developers, Neville Mahon now lives in his partner’s rented property. David Williams reports
(Read Newsroom Investigates latest video story, on a Mahon-linked business in Papua connected to rainforest deforestation)
He was a high-flyer, described as one of the “golden boys” of property development.
With real estate projects apparently worth $600 million in Fiji, in 2007 the NZ Herald called Auckland developer Neville Mahon “one of New Zealand’s most ambitious developers”.
Even a coup couldn’t curb his confidence.
Yes, he admitted, Fiji’s December 2006 coup had an immediate effect on sales for his Fiji Beach Resort & Spa on Denarau Island. But a few months later he said, stridently: “It’s actually bounced back a lot faster than I imagined.”
(When Mahon appeared in the Auckland High Court in December 2006, over legal action taken by ANZ National Bank, he explained he had been in Fiji and “there were business problems there”.)
By April of 2007, Mahon – ‘Fiji’s Mr Villa’ – was expanding into Australia, with plans to build 18 luxury villas in coastal New South Wales. (He declared he didn’t want to be a “flash Harry”, and kept a low profile.)
The Herald story noted the Denarau project, managed by hotel group Hilton, was backed by Auckland company Strategic Finance. Later it would be revealed the Bank of Scotland International and South Canterbury Finance were also involved.
Wet weather had halted work on his other Fiji project, on Nananu Island. However, it was ill financial winds that clipped his wings – but didn’t end his investing career.
Meat in the sandwich
In 2009, as the global financial crisis bit, struggling finance companies called in their loans, belatedly trying to claw back investors’ money from ill-fated projects. Several New Zealand-funded developments were caught – including Fiji Beach Resort & Spa.
Two Mahon companies, Denarau Investments and Denarau International, collapsed.
The Auckland developer told the Herald: “I’m jammed like meat in a sandwich between Bank of Scotland and Strategic.”
The latter loaned $75 million for the resort’s 90-villa expansion and facility upgrade, while the former provided a $45 million facility. That left villa owners – mostly New Zealanders and Australians, including former All Blacks Ian Jones and Andy Haden, and former Fisher & Paykel boss John Bongard – dealing with receivers KordaMentha. (The resort was still operating.)
Owners, who could stay in their villas for 10 weeks a year, were meant to be paid rental income from tourists. But payments stopped in September 2008 – until kick-started again by KordaMentha.
At one stage, rent arrears were estimated to be $5.5 million. Some villa owners were forced to mortgagee sale. A legal battle followed, and threats of a lockout by owners.
Fiji Beach Resort & Spa was one of Strategic’s biggest loans. In March 2010, Strategic Finance went into receivership, owing $400 million, joining a list of almost 50 failed finance companies since May 2006.
The full extent of South Canterbury Finance’s involvement in Fiji, including in Mahon’s projects, only came to light later.
(The Nananu Island project was, according to South Canterbury Finance, a “disaster”, and the development passed from Mahon to Aucklander Evan Williams.)
In a deal that angered some villa owners, receivers sold the outstanding debt from the Fiji Beach Resort & Spa project to Most Best Holdings, a company registered in the British Virgin Islands in which Mahon had a 40 percent stake.
“I’m only a minority shareholder with a group of Fijian businessmen,” Mahon told Stuff. “It’s not like I’ve taken it over or anything.”
Money problems would continue to dog Mahon, this time back in New Zealand.
No assets in New Zealand
Since April 2017, Newsroom counts more than a dozen High Court and Court of Appeal judgments involving Mahon and his companies on home soil, involving properties in Auckland and Queenstown, and court claims and counterclaims of millions of dollars.
He’s also successfully delayed one bid to bankrupt him.
Attempts to complete a housing development in Māngere (pursued by Mahon’s partner Saren Loo but with his involvement), upgrade and sell a run-down hotel and two adjacent development lots in central Auckland, and draw up plans for luxury apartments across the road from Queenstown’s botanical gardens, have left a trail of defaulted loans, a mortgagee sale, and debts pursued in the courts.
The ambition noted in Fiji appears to have been diminished.
In March, as the property developer tried to stave off a bankruptcy application in a long-running stoush with former lender, Tim Edney, an Auckland property investor, Mahon’s lawyer told the High Court he had no assets in New Zealand and was being supported by his partner, Loo. He lived in a property she rents, according to a National Business Review report.
Michael Lenihan, a lawyer for Waimauri Ltd, a company associated with Edney, said it was impossible to tell if he was putting his assets out of reach without disclosure of his overseas assets – including links to the Tanah Merah palm oil project in Papua, potentially – and whether he holds New Zealand assets through other entities.
While Mahon is predominantly involved in property, several court cases mention other investments. In October 2015, while negotiating over the purchase of five Queenstown properties, it was suggested Mahon was expecting “mining money” to come in.
In another case, while giving evidence to halt bankruptcy proceedings against him, Mahon mentioned “a debt that is due to [him] from a joint venture forestry operation”. That’s not just from loans, but an equity interest as well, Mahon says in evidence to the High Court.
Then there’s iron sand mining.
Mahon was a bit-player in a failed bid for the Taharoa iron sands mine, near Kawhia, from subsidiaries of BlueScope Steel, the ASX-listed company that operates the Glenbrook steel mill.
NZ Iron Sands Holdings, set up by Australian investment company Gleneagle Securities for a syndicate, entered a conditional sale agreement to buy Taharoa Ironsands in 2016, but a deal wasn’t struck. The company was sold to another party the following year, after which NZ Iron Sands went to court claiming $506 million, for wrongful termination and being treated unfairly in the second sales process.
In February last year, BlueScope’s financial statements said the legal proceedings – which cost it $4.9 million in six months – had been discontinued after its subsidiary, Toward Industries, agreed to pay a “small amount” of legal costs.
NZ Iron Sands Holdings’ sole director is Nithan Thirunavukarasu, also known as Nithan Thiru, who at the time was a director of Gleneagle. The company’s ultimate owner is NZ Iron Sands Investments, in which Mahon has a 15 percent stake. (Action is being taken to remove both entities from the companies register as they’re overdue in filing their annual returns.)
Could source up to $10m at short notice
Thiru, an Australian financier, emerged as a key figure in a 2018 High Court case over the Queenstown properties. Justice Christian Whata was trying to discern whether Mahon, if given the opportunity, could have afforded to buy them.
The deal on the table was for $5.1 million. The properties, now owned by Huadu International Management Group, controlled by Christchurch’s Wang Jianping, have a current rateable value of $10.8 million.
Whata’s judgment was confident Mahon could have raised the money from Thiru.
“Mr Thirunavukarasu gave evidence that, if necessary, Mr Mahon could source finance up to $10m at very short notice through his company Gleneagle because of the substantial level of collateral (more than $15m) held by Gleneagle on behalf of Mr Mahon. He noted, for example, that circa $6m was sourced at short notice for another development in the Queenstown District at about the time of the Park Street negotiations.”
(Thiru was also associated with the Tanah Merah project in Papua, though he told news website Mongabay and investigative journalism initiative The Gecko Project last year he’d resigned his position as sole director of three companies.)
It’s unclear if this was the development referred to, but the company Staff Accommodation at Hansen Rd Ltd was incorporated in December 2016, and owns 3.4ha of land in Frankton, Queenstown, with a capital value of $5.2 million. Mahon was the initial shareholder and director but five days later he was replaced by Thiru and Gleneagle Securities.
Mahon’s company Coronation Road Holdings lodged a subdivision consent application for the company to build 350 units in 10 apartment blocks at the Frankton site but nothing eventuated.
Another Gleneagle-owned company, Cottages at Arthurs Point Ltd, of which Mahon is still the director, used to own land at Arthur’s Point, a town located between Queenstown and Arrowtown.
Relying on a spirit of fairness
The hearings over Mahon’s property deals are complex and multi-layered, but there are some similarities.
In relation to Auckland’s Arena Hotel, and the proposed Queenstown development, Mahon pursued resource consents for properties he didn’t own, and then claimed the other party, his former investor, Edney, in both cases, reneged on oral agreements.
Mahon believed he would be treated in a “fair” way and in the right “spirit” – that his spending to increase the value of the central Auckland properties would be rewarded by a financial “clean slate”, if the sale price was high enough.
But a lack of written agreements hampered his cause.
In the case of the Arena Hotel, and two adjoining development lots, lawyers for Mahon’s company Beach Arena Ltd argued he should expect to rely on cumulative representations from Edney and his representatives. But, in a judgment from May last year, Justice Matthew Muir warned the test can’t simply be the “vibe”, to quote lawyer Dennis Denuto in the 1997 film The Castle.
Justice Muir was sympathetic, however, noting the hotel’s numerous and severe maintenance problems, including masonry falling on the footpath, serious flooding problems leading to a ceiling collapsing on a guest, and major sewage overflows that necessitated pumping 13,000 litres of sewage from the basement. Mahon, Loo, and Loo’s brother Con Lu, a university lecturer in engineering, also pursued a programme of room and facility upgrades, and securing resource consent for the development lots, in a bid to improve the properties’ value for a sale hoped to benefit from.
A judgment of more than $800,000 was made against Mahon, and his counterclaims were dismissed, but Justice Muir lamented it was a rare case of an “apparent disjunction” between what is seemingly fair and the result.
Another controversy only wrapped up recently was that of the Māngere development.
By the time Mahon’s partner Loo’s company Coronation Gardens Ltd hit financial trouble, 20 terraced townhouses had been built and sold. The company defaulted on its first mortgage to BNZ, and more than $14 million of loans to Small (2005) Ltd, an Edney company, which went on to acquire BNZ’s debt and securities, allowing it to initiate a mortgagee sale.
The land was transferred to a new Edney-controlled company, The Golden Belt Mining Co Ltd, which, Coronation Gardens argued in the High Court, was at a price under-valuing the land.
The court denied the company’s application and, the day after the judgment, Loo resigned as director and shareholder, replaced by Mahon. Then, the very next day, the company went into liquidation at the urging of Inland Revenue for unpaid GST and PAYE.
Liquidation of the company only wrapped up last month. The final report, by liquidator KPMG, said its analysis revealed the company was owed an unspecified sum by a related party.
KPMG issued a demand for repayment and the related party requested time to make a settlement offer. The offer was approved and a settlement deed signed, but the due date lapsed without payment.
“The related party advised the liquidator that the financial impact of Covid-19 had impacted on their ability to make payment,” the report said. “The liquidator determined that it would be uneconomical to continue pursuing the matter.”
Coronation Gardens has now been struck off the Companies register.
Mahon’s legal fight continues. The developer and his company Beach Arena Ltd were given leave to appeal Muir’s 2017 High Court judgment to the Court of Appeal, and a hearing was held last week. The decision has been reserved.
The lead-up to the hearing threw up some interesting details. Mahon, acting for himself and without a lawyer, asked the court for an extension to file his case. Auckland’s lockdown had caused cashflow problems and disrupted preparations, he said. His litigation support person had other commitments.
Edney and his companies, meanwhile, were represented by David Chisholm QC. Chisholm complained about long delays and criticised Mahon for not appointing a lawyer to act for Beach Arena Ltd “despite having previously been warned of the need to do so”.
The Court of Appeal granted the extension, saying the delays weren’t unreasonable and the facts of the case were not “clearly hopeless”.