Work has been shut down on a multimillion dollar Auckland development that would have housed up to 500 people, and the developer faces bankruptcy – for the second time. Newsroom’s Jonathan Milne investigates.
At the age of 56, Rob Reece is living at his mother’s house in New Lynn. His marriage has broken up, he’s working seven days a week on building sites and in a paint factory to make ends meet, and the big vacant lot he was developing is about to be sold out from under him.
“I put every penny I owned and friends’ money and everything I have into it,” the former builder tells Newsroom. “But the lender, they’d rather pull it down than build it up.”
He had borrowed at least $11 million from three different second-tier lenders to develop the 13,600 square metre block, between the Countdown, the Mitre 10 and the railway line in the South Auckland suburb of Takanini.
As he describes the collapse of his dream, it’s possible to feel sorry for him – except for one thing. This is his second time round.
The former soldier-turned-builder’s first venture into the public eye was when he publicly clashed with his business partner Craig Busch, the “Lion Man” with whom he owned Zion Wildlife Park near Whangārei. He wanted his $400,000 back, he said, or he would repossess the lions. In the end Busch’s mum settled what was owed.
That’s really just a curious footnote to his story.
In 2009, Robert James Reece went bust in dramatic style. The Dynasty Group of film, hotel and development companies that he co-owned with Hong Kong businesswoman May Wang were put into liquidation, owing $20 million; he was bankrupted and disqualified as a company director.
Reece and Wang each blamed the other.
“The short story is that Rob Reece offered to put funding or equity from his Legacy Group company into the Dynasty Group,” she said afterwards. “That promise never eventuated, the credit crunch came, the property market collapsed, Rob Reece resigned as a director of all the companies and then declared himself bankrupt.”
At the same time that the Dynasty Group was grinding through a four-year liquidation, she was fronting a high-profile bid to buy the 22 Crafar family dairy farms, totalling 8000 hectares, from their receivers; that deal also collapsed in headline-grabbing disarray.
She too was bankrupted. Hong Hong authorities charged her with fraud in relation to Dynasty Group, and she was sentenced to eight years in prison.
“Last time I went down, I didn’t owe any suppliers or tradesmen,” Reece says. “It all come down to the second-tier lenders tipping up and falling down in 2010. And I got tipped up too.”
None of this comes as a surprise to the directors of the company which holds the first mortgage over the Takanini property. Silver Harbour Capital managing director Diggory Brooke said they did their checks but, ultimately, they were confident as the first mortgage holder that they could recover their loan from the asset.
And so it has come to pass. To Reece’s dismay, Silver Harbour has put the Takanini lot up for mortgagee sale. It’s being marketed by Bayleys and, after the first offer fell over, they now have a new offer. The prospective purchaser is going through due diligence and, all going well, will settle on November 23.
It’s most unlikely the new owner will build terraced apartments there. Bayleys estate agent Layne Harwood said it would make more sense to put a commercial or mixed use on the property, given its location and its town centre designation, rather than an intensive residential designation.
Silver Harbour should get most of its $11m loan back, as first mortgage holder; Nova Finance and First Finance probably won’t see a cent of their loans. (Geetha Nair from Nova Finance couldn’t be reached for comment; Elsa Bi from First Finance terminated the call).
“They’ll be gone,” said Brooke.
So why would Silver Harbour lend so much money to a developer with such a disastrously bad track record? “We lend on the asset and, at the time, the asset was in fine shape,” Brooke said. “It was a long time between drinks for him, and we thought he’d rehabilitated himself. And we were willing to give him a chance to progress this development. It just didn’t work out like that.
“It wasn’t Covid at all. We had some other big loans that came through Covid fine, just because the people involved in them were more organised and had everything sorted out and under control. Whereas that was not the position with the person.”
Government fast-track project
Reece bought the land for $3 million, eight years ago. It was part of a Takanini special housing area just created by the previous government, intended to fast-track residential construction. “This is the momentum and scale we need to improve housing affordability and supply in our largest city,” said former housing minister Nick Smith, launching the scheme.
The special housing areas were cancelled after Labour came to power; former housing minister Phil Twyford said the scheme had failed to make housing more affordable.
Certainly, they failed to deliver homes – affordable or otherwise – on the big vacant lot behind Countdown, Takanini.
Reece went through at least three architectural firms as he developed his vision. He branded it Glenora Park Village. At one stage he proposed to build apartments up to five storeys; subsequent architects, engineers and planning consultants managed down his heightened aspirations to four storeys, and then three.
Newsroom has been in touch with all three firms. The first, George Clarke of GMC Architects, designed the five-storey apartments blocks that Reece wanted in 2016. “He said he was he was doing what he wanted to do,” Clarke recalled. “We were paid for the work we did.”
At the Manukau office of Cato Bolam planning consultants, director Chris Solleder said the $20,000 invoice was paid late, but it was paid. “He’s got a history.”
Cato Bolam’s credit checks had disclosed Reece’s business history and former bankruptcy. “Rob was pretty upfront with the whole funding scenario. And he explained to us his past issues so we knew what we were getting into.
“They ran out of funding and got hit by Covid. So they spent a bit of time trying to get a new funder, which they did do. We assisted them with that process. And then their funder basically took over the management of it.”
That funder was First Finance. The finance company replaced Cato Bolam with their own preferred engineer and architect, he said.
K&J Architecture and Design on the North Shore was brought in. Director Kevin Chen said the final plans they developed contained residential units up to three storeys.
At the point Reece’s company Glenora Developments Ltd took out the loan from Silver Harbour, the site had a market valuation of $21.5 million. Assuming he sold all 175 homes for up to $400,000 each, he expected to gross $70 million.
But by the time Newsroom visited the site this month, it had become an eyesore. Although Reece had put in some road kerbing and some pipes, neighbours said they’d seen no workers on the site for a year or more.
For a while, they said, someone was living on the site in a bus. The fences have come down; battered supermarket trolleys lie around. Fly-tipping has left it littered with household rubbish; a toaster here, a fridge there.
Reece said he hadn’t visited the site for a long time.
Six months ago, he had construction funding lined up, a second valuation, and everything in line, he said. “But now the world has shit itself. House values are going down, house prices are doing down.
“Building costs are going up through the roof and the buyers are disappearing during the interest rates are going up. Covid, Ukraine, the Chinese economy isn just tanking. There will be recession coming. But all that aside, the deal I had wasn’t upheld.
“All I’ve got is people feeling very sorry for me. And a real onerous second-tier lender that set me up to fail from the beginning. And there’s nothing I can do about it, right? And I’m done. I’ll be bankrupt – it might take me a year, it might take two years, but I have got absolutely no horsepower. None.”