Du Val Construction is understood to have settled with some contractors over claims of $1 million-plus in unpaid invoices, persuading their lawyers to withdraw High Court liquidation action.
But the company isn’t in the clear. It’s believed financiers 1543 Capital and Clearwater Capital, which are both US-based and Caymans-registered firms, are keeping a close eye on the big developer’s projects.
This includes Parry Terraces and the towering Hillside-Verge Apartments in the Auckland suburb of Mt Wellington, and now the company’s flagship Mountain Vista terraced housing development in Mangere Bridge.
Three law firms representing half a dozen wholesale investors have called a joint meeting for all investors, set down for Tuesday next week.
It’s the latest development in the colourful business history of Du Val’s founders, jet-setting couple Kenyon and Charlotte Clarke. In 2012, companies owned by John Kenyon Clarke and his mother Helen Jenepher Clarke were liquidated. They had owed more than NZ$56m to lenders including the Bank of Scotland and Heartland Building Society.
In a teaser for a self-produced reality TV show?The Property Developers?that the Clarkes have been pitching to broadcasters, Kenyon Clarke says: ※I lost it all, and had to start right again from my beginnings.§
It’s a brash social media persona that’s aggravating to those who are owed money. Yesterday, Clarke posted an Instagram video of himself, checking out what he said was a $4.7 million Ferrari.
He’s repeatedly threatened Newsroom and other media reporting on the company’s difficulties. ※I’m also happy to see legacy media in financial trouble,§ he said yesterday, coinciding with proposals to lay off hundreds of jobs at Newshub and TVNZ.
※Hopefully they pivot and save their businesses and stop being such scumbags. I will never give an interview again that’s not on live TV.
※I’m just itching for someone to step over the defamation line - next time I won’t settle. I will make sure I keep my boot on their neck.§
He added: ※My one regret in business is being too soft.§
The group of investors is concerned about Du Val pausing payments from some of its investment funds. ※We understand that this matter may be urgent because Du Val is asking investors to sign up to an ＆Information Memorandum’ that would convert their current investments into equity in Du Val Property Group Ltd,§ the lawyers’ letter says.
Both Newsroom and the investors’ lawyers have asked Du Val to answer questions about the property group’s solvency position, and apparent loans from the Du Val mortgage fund to developments like Parry Terraces. They have not replied.
The 38 homes at Parry Terraces are now completed, lining two sides of a lane named after Kenyon Clarke’s mother - but both investors and contractors say they are out of pocket. One contractor that says it’s taking court action is Crown Flooring.
Managing director Timur Galiyev claims his company is owed nearly $100,000 for its work on the floors in the Parry Terraces development.
He’s now been approached by Kenyon and Charlotte Clarke to discuss settling, he says. ※I’m in a holding pattern at the moment,§ he tells Newsroom. ※It looks like they have punches coming left, right and centre.§
Around the corner from Parry Terraces at Verge Apartments, building stopped weeks ago. When Newsroom first visited the site, it was open and unsecured. Subbies for SW Scaffolding, who were stripping their steel off the buildings, said the company was owed money.
The Financial Markets Authority had already issued Du Val with a formal warning last year, for misleading investors about suspending cash distributions on the Mortgage Fund. It proposed instead to convert cash distributions into units in the fund, pending a potential public listing.
Earlier, it had issued a direction order against Du Val Capital Partners, for conduct in breach of the fair dealing provisions. Du Val appealed unsuccessfully.
This week, the Authority declined to comment.
The lawyers - litigation solicitors Kim Francis and William van Roosmalen, and barrister Jeremy Johnson - say they will be asking investors to commit funds to ※advance matters§.
The investors they represent have put money into three funds: Du Val Mortgage Fund, Du Val Built to Rent Fund, and Du Val Opportunities Fund. One?woman is said to have put in up to $1.2m - all the proceeds from selling her house.
Another elderly couple put most of their retirement savings - nearly $1m - into the Du Val Mortgage Fund Limited Partnership. They anticipated?a 10 percent return every quarter,?their lawyer says, but the money dried up two years ago.
Johnson tells Newsroom one option on the table is applying to the High Court to liquidate Du Val.
※The main object is to discuss the current situation with concerned investors and lay out a legal pathway forward for them - to test their appetite to move forward as a group,§ he says.
※The primary concern is the holdup on the distributions, the lack of distributions and an ability to withdraw capital from the funds. Court action will be one option that will be discussed.§
It wouldn’t be Du Val’s?first time in court: the firm’s 242-unit Lakewood Plaza in Manukau already has liquidation claims against it of $16.2m, in a dispute involving Du Val and its construction contractor Downey Management.
But Du Val rejects criticism. Last month, Du Val chief executive Charlotte Clarke told Newsroom that distributions from Du Val Mortgage Fund had been deferred in compliance with the Limited Partnership Agreement. ※The reasons for this have been clearly explained to the investors it affects,§ she said.
The Mortgage Fund’s operations had been comprehensively disclosed in the Information Memorandum. ※This investment was only made available to wholesale investors who understand the risk associated with investments of this nature and, the fund board advises that it continues to operate in compliance with the Limited Partnership Agreement.§
As for Du Val Property Group Ltd, as part of its restructure, the company had adopted IFRS reporting standards that define its recognition and treatment of inventory and borrowings while developing housing. ※Inventory is recognised at cost rather than sale value or registered valuation until developments complete and projects settle,§ she says. ※None of this constitutes insolvency.§
She assures creditors: ※They will be paid as they always have been.§