Disaster in Public relations

Australian banking giant Westpac is about to be caught up in a major brawl with apartment investors in New Zealand.

The New Zealand arm of the bank is the major funder of a string of apartment developments in Auckland.

Investors have bought hundreds of apartments marketed through failed housing financier Blue Chip Investments. A number of Kiwi developers sold their apartments through Blue Chip which tacked on a premium to cover guarantees they provided, which secured finance for the apartment purchasers.

Blue Chip is now in liquidation and the guarantees are worthless. The developers however maintain they have binding contracts with the investors and are calling on them to honour their contracts, notwithstanding the value of their units has plummeted. It appears the prices of the apartments were inflated to take account of the premium for the guarantees. If the apartments were re-sold now they would go at much lower prices.

Investors are up in arms and a number have initiated legal challenges. With Blue Chip out of the way their aim is at the developers.

Auckland barrister Paul Dale is launching a High Court challenge on behalf of more than 250 investors. Dale says his clients' contracts are illegal for a number of reasons including that they breached the country's Securities Act and Fair Trading Act.

If Dale is successful and the contracts are thrown out the developers will be left with a glut of apartments unsold and unrented, with price tags well below what they originally sold for. Standing behind the developers is Westpac. The Australian bank has been a major player in the New Zealand property market and has financed a number of developers that did business with Blue Chip.

In one of the developments being challenged, The Barclay in Albert Street, Auckland, which is completed, deposits paid by investors have been frozen while talks are underway with the developer, the Greenstone Group. Westpac is Greenstone's financier.
Westpac embroiled in New Zealand property fall-out- failure in public relations