Delta #EpicFail —Noble Subdivision: Cameron, Crombie and McKenzie

Election Year : The following opinion is offered in the public interest. -Eds

Received from Christchurch Driver [CD]
Tue, 23 Feb 2016 at 10:02 p.m.

This correspondent was very interested to read today’s front page ODT article which appeared to confirm the suspicions of an earlier post.

Delta CEO Grady Cameron must be given credit for being honest and transparent, for confirming that Delta spent $3.3M last year buying more debt on the Noble (Yaldhurst) Subdivision. This is in contrast to the cabbage-like behaviour of DCHL chairman Graham Crombie, and DCC/ DCHL financial controller (GCFO) Grant McKenzie. It has hard to escape the conclusion that Mr McKenzie when questioned by city councillors must have known the amount of money Delta spent “strengthening its position”, ie buying up securities that ranked ahead of the Delta security. First, he said he did not know the figures involved, then he indicated to the ODT after Monday’s council meeting that the figure of $3M “was not accurate”, and that he “could not say” what the figure was. Simply put, if Mr McKenzie could not say what the figure was, how did he know that $3M was not accurate ? It seems clear he did know, and is dancing on the head of a pin. He could say the figure, but he would not. No one is counting the six figure amounts ! Maximum points for dissembling to that man.

This and other verbal pirouetting at a recent Council meeting where Mr McKenzie was unable to distinguish between dividends and debt repayment despite repeated questioning from Cr Lee Vandervis was also alarming. Perhaps the lure of a return to the relatively debt free safe haven of the University beckons, not subject to scrutiny of the citizens….

The other person of interest is DCHL chairman Graham Crombie, who also has trouble with numbers and counting. Cr Hilary Calvert surmised that the $11.7M already written off plus the $13.3M debt meant that Delta had an exposure of up to $24M. Cr Calvert was close, if not quite right as the $13.3M was the value of the debt Delta estimated, not its actual debt. Mr Crombie said the figure “never got that high”, and that the interest and penalties were “horrendous”. Mr Crombie’s nose is growing : Grady Cameron confirmed the core debt was $11.3M, plus $3.3M buying debt, plus the previous year’s debt write down of $10.7M which has already been attributed to Noble by Delta. These add to MORE than the $24M suggested by Cr Calvert, yet Mr Crombie was happy to sidestep Cr Calvert, Cr Vandervis and any other councillors who were keeping up – not many it seems.

We should pause re : Mr Crombie has consistently said since the Noble debacle became public that all would be well, Delta would recover its core debt and the penalties and interest weren’t of any moment – yesterday he described them as both “horrendous” and “irrelevant”. An interesting question is – why were the penalties and interest “horrendous” ? The answer is because Delta’s security was so far down the security chain as to be virtually meaningless, and as a consequence, its charges indeed were horrendous because they had little chance of ever being paid, and the rates reflect that.

This correspondent is alarmed that an accountant would describe the interest payable on a debt as irrelevant, especially when the company in question has in effect financed the entire core debt of $11.3M with either borrowed money from the DCC, or by foregoing dividends to the DCC. Mr McKenzie would certainly not agree that the interest charges are irrelevant because Delta’s loan funding has been arranged through DCC treasury at somewhere between 4-7% per year from 2012. Although, the actual figures might be 3.9% to 6.85%….

Delta  logo 2We now know, thanks to Grady Cameron, that Delta embarked upon this foolhardy venture with a security ranking somewhere between 4th and 6th in line.

The crucial question is : after this year’s debt purchases, where are they ranked now ? Delta and DCC refuse to confirm this. If they were ranked first, then it would be Delta themselves that had forced the mortgagee sale process. This seems unlikely since if Delta had control as first security, they would have no reason to hide this and the PR department would spin this as Delta taking firm and decisive action to recover their debt. Instead, Mr Cameron meekly says that Delta is a “secured creditor” and the mortgagee sale process is a “significant movement” towards payment. He doesn’t say to who….

It is also a concern why Delta invested a further $3.3M, if they still don’t have control of the project. Others have posited that they almost certainly bought the debt at a reduced value, but the key point is that they don’t have control and first security does not have to have any regard at all to the interests of lower ranked securities. This correspondent has seen at first hand several similar land deals where second ranking securities from large finance companies received zero. One can be sure that the first security will also have heavy penalty rates and other costs will emerge from the woodwork.

Delta were not some minor suppliers on the project. They supplied all of the infrastructure for the subdivision. There aren’t any other big parts to a subdivision. Typically, if the land is correctly zoned, the rule of thumb for the cost of a subdivision is a third land cost, a third infrastructure cost (Delta), and a third profit.

What is truly astounding is that there were at least three securities ahead of Delta and they knew this going into the deal. Any developer that needed three mortgages or debt securities just on the land and the resource consent process before they started work was doomed if there was any trouble, lack of expertise and unforeseen problems. This subdivision had all those, in spades. A further red flag should have been the involvement of one Mr Justin Prain, who previously touted the unique benefits of the similarly doomed 5 Mile town development at Queenstown. In fact the sales pitch was remarkably similar for both developments.

There are many questions to be answered about this debacle, but one that might unlock the whole saga is : what involvement did Murray Valentine, Mike Coburn and Peak Projects have in any entity related to the Noble Subdivision ?

This correspondent urges the other new Delta directors who were appointed after the Noble deal was entered into to show some cojones and order an inquiry. Clearly, it is just too hard for Mr Crombie.

This item via whatifdunedin:

### nbr.co.nz Monday May 25, 2015
Apple Fields’ directors fined $30,000 over filing omissions
By Suze Metherell
Justin Prain and Mark Schroeder, directors of the formerly NZX-listed Apple Fields, have been fined $30,000 each for failing to file financial statements for three years.
The Christchurch District Court found the two directors failed under the Financial Reporting Act to report Apple Fields’ accounts, according to Judge Emma Smith’s February judgment. The Financial Markets Authority brought the charges against the two directors after they failed to report the annual accounts for the financial years between 2011 and 2013. The FMA can seek fines of up to $100,000 for failure to report.
Christchurch-based Apple Fields, which listed on the NZX in 1986, was once New Zealand’s largest corporate orchardist and clashed with the Apple & Pear Marketing Board for the right to export fruit independently. The company moved into property development in the early 2000s, with Mr Prain appointed a director in 2002 and Mr Schroeder in 2003.
Apple Fields entered into a property development arrangement with Noble Investments in Christchurch, which was planning to subdivide land on Yaldhurst Rd into 254 residential sections as well as develop a village centre. After changes in the joint venture, Noble Investments could be considered a subsidiary and its accounts needed to be included in Apple Fields’ group accounts, according to the judgment. The Yaldhurst development stalled when Apple Fields ended up in a protracted legal battle with neighbouring landowners.
Read more

Related Posts and Comments:
23.2.16 DCC: DCHL half year result to 31 December 2015
19.2.16 Delta: Update on Yaldhurst subdivision debt recovery
15.2.16 Delta / DCHL not broadcasting position on subdivision mortgagee tender
30.1.16 DCC Rates: LOCAL CONTEXT not Stats —Delta and Hippopotamuses
● 29.1.16 Delta #EpicFail —Yaldhurst Subdivision ● Some forensics
● 21.1.16 Delta #EpicFail —Yaldhurst Subdivision
21.1.16 DCC LTAP 2016/17 budget discussion #ultrahelpfulhints
10.1.16 Infrastructure ‘open to facile misinterpretation’…. or local ignore
15.12.15 Noble property subdivision aka Yaldhurst Village | Mortgagee Tender
21.9.15 DCC: Not shite (?) hitting the fan but DVL
20.7.15 Noble property subdivision —DELTA #LGOIMA
1.4.15 Christchurch subdivisions: Heat gone?
24.3.15 Noble property subdivision —DELTA
23.3.15 Noble property subdivision: “Denials suggest that we have not learned.”
17.3.15 DCC —Delta, Jacks Point Luggate II…. Noble property subdivision

● 20.3.14 Delta: Report from Office of the Auditor-General

█ For more, enter the term *delta* in the search box at right.

Posted by Elizabeth Kerr

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34 Comments

Filed under Business, Construction, DCC, DCHL, Delta, Economics, Geography, Infrastructure, Media, Name, New Zealand, People, Politics, Project management, Property, Resource management, Site, Town planning, Urban design

34 responses to “Delta #EpicFail —Noble Subdivision: Cameron, Crombie and McKenzie

  1. Peter

    I found this commentary by the correspondent to be very convincing. The analysis of comments by the three mentioned as they twist and turn over Delta is revealing and perceptive.
    Grant McKenzie came into the job finding the finances of the DCC to be in a complex shambles. He will have to either deal with it or continue on a path of make believe because the mess is just too difficult to fathom. This week we have been treated to the bizzare spectacle of the stadium ‘going into the black’ and Delta going into further debt to get itself out of debt! Incredulous. How are we supposed to have confidence in these people? They give every indication they have lost it.

  2. anna

    Let us not forget that this is the same Mr Crombie on $900-a-day, helping the Commissioner at the SDHB. Oh dear, hardly reassuring.

  3. Gurglars

    All led by Mr. We will find no-one guilty Cull.

    Where one would expect Cull by name, cull by nature, we have got
    Cull by name and Null by nature.

    There is no hope of the public finding out the truth on any of the DCC extravagances because no one is to be found guilty.

    This of course will include Crombie as the other $900 man will have to protect his daily interest. Suspicions about Crombie would bring down the dominoes of DCC financial finanglings.

    We can be sure of one thing on the financials. With so much obfuscation the worst is yet to come.

    • Diane Yeldon

      Gurglars: “We will find no-one guilty” Cull. Yes, obviously (to me at any rate) nervously keen that this should be the case, including the man himself.

      • Hype O'Thermia

        Contagion phobia, or, Uneasy lies the clown who lost his cred.
        [A Comico-Tragedical Interlude in three short Acts]
        Attishoo!
        A tissue of lies
        We all fall down

      • Elizabeth

        Cull is standing for the mayoralty again. So sayeth the CEO, I’m told.

        • Hype O'Thermia

          He’ll win again. He’ll sing that familiar happy song about how the sun will come up tomorrow, and tell soothing stories and smile his honest friendly TV smile, and all the drowsy bunnies will finish their Milo and go “tick, tick”.

        • Elizabeth

          *hope someone cuts up his suits

        • Diane Yeldon

          It seems that the powers that be can find no-one else and, in desperation, resort to the status quo. Not good for Dunedin. I wouldn’t be surprised if even the big players feel considerable disappointment, along with a considerable number of disllusioned voters. Cull originally came to political prominence in Dunedin as the great (false) hope to save the city from the stadium. And it probably helped that enough vague voters had seen him on TV. Again, not good for Dunedin. Labour has got little chance of producing a star from nowhere, to say nothing of overt and obvious central government meddling in local body elections in New Zealand historically having been the kiss of death. And correctly so, IMO, as it causes a conflict of interest or at least a perceived one. Labour would be better to do what has always been done in the past in NZ local body elections: set up a local ticket with prominent local names and with compatible values to Labour but at an arm’s length from the actual Labour Party itself.

  4. Peter

    Like Richard Thomson, he wears too many hats. Even the most astute of people would struggle to keep track of the detail work needed in their areas of interest. There is only so much time, energy and brain capacity to cope.
    The danger of course is nothing gets done properly and too much winging it results.

  5. Rob Hamlin

    I echo Peter, good article. Maybe the ODT might consider it?

  6. Rob Hamlin

    One has to have serious reservations about ‘professional’ directors. The lists of directorships, and the variety of them, that some have, leads one to wonder how they can keep track of all their commitments, and have the time and specific skills to fulfill the requirements of any one of them satisfactorily. When so many directorships are held in so many different ways by so few (sorry Churchill), it also becomes ever harder to avoid real and perceived conflicts of interest.

    One quite radical response might be to limit the total number of registered company directorships and non-corporate trusteeships, both here and overseas, that any one individual can hold quite sharply to, say, three, and to put in and enforce quite vigorous penalties, such as very heavy personal fines and long bans from holding ANY NZ directorships, for breaching this limit.

    This would not only solve the problem of directorial overstretch and the ‘magic roundabout’ of old, inbred generic retreads who know one another too well, but would forcibly inject massive amounts of new talent that might have more specialist knowledge (and fewer possibly undesirable cross-connections) into the corpus directorum.

    It would also curtail the spawning of ever more cross-connected shell-entities, most of which have no GOOD reason to exist. The Carisbrook Stadium Charitable Trust is a good case in point. It (according to its last filing, now over a year ago) continues to exist and process money (a single donation of EXACTLY $200,000 in and a single grant of EXACTLY $200,000 out). It apparently has one (unidentified) volunteer working for one hour a week, some four years after its supposedly sole reason to exist disappeared. It comes complete with, I believe, six well-connected trustees in place.

    Were they forced to the pinch, I doubt if many (any) of these worthies would chose to retain this particular commitment in their allowable portfolio of three, and this ‘charitable’? entity could therefore finally and thankfully be consigned to history.

    Were this rule to be brought in, the directorial structure of DCHL would be unrecognisable, with a much larger number of directors. This would create an opportunity (requirement) to appoint fresh, dedicated individuals, many with good specialist knowledge and real experience of those companies’ business to these boards. Of course some may lack experience as directors, but given the current recent events, truly what is there to lose?

    I am sure that many in the well connected ‘professional governance’ community, the controllers of complex nests of shell entities and the Institute of Directors would vigorously disagree with this proposal, which might be another very good reason for seriously considering it.

    • Diane Yeldon

      Rob Hamlin: It sounds as if the Law Commission would do well to re-examine the purposes of trusts. Too many of them are used to hide financial dealings by people with something to hide. Similarly the definition of ‘charitable purposes’ needs an overhaul. Allowing spectator and participant sport of both professional and amateur kinds (including horse racing where people bet!) to be ‘charitable purposes’ just demonstrates extremely good lobbying by the well-connected IMO and maybe reduces donations available for real charitable purposes. I remember checking this out and found out that amateur sports clubs could claim virtually every expense – prizes, trips away, building a clubhouse – as ‘charitable’. Very much a case of ‘charity beginning at home.” The only thing they couldn’t claim for was booze for the parties.

  7. Hype O'Thermia

    Tremain today!!!
    Because of him I give the ODT a lot more kind thoughts than they otherwise deserve.

    • Peter

      I agree, Hype. Tremain is a shining light for seeing things how they are and not what they would like them to be. He is an incisive cynic but one with life inside him and a sense of humour to boot.

  8. Hype O'Thermia

    Has anyone peered at this major assets – ahem – liabiliy through the clusterfeck scanner? What if everyone was bright as a new penny and honest as the day is long…… if only there had been a proofreader? It’s an alternative to CSR – congenital stupidity rulz, oi oi.
    According to my friend Google –
    nobble
    ˈnɒb(ə)l/
    verb BRITISH informal
    1.
    try to influence or thwart by underhand or unfair methods.
    “an attempt to nobble the jury”
    synonyms: bribe, corrupt, suborn, buy, buy off, pay off, get at, induce, lure, entice, grease someone’s palm, oil someone’s palm/hand; More
    2.
    obtain dishonestly; steal.
    “he intended to nobble Rose’s money”
    synonyms: steal, thieve, rob, embezzle
    “what’s to stop him nobbling Rose’s money?”

  9. Elizabeth

    Garrick Tremain 24 Feb 2016

  10. Diane Yeldon

    Grant McKenzie didn’t give Cr Calvert a straight answer about whether Delta held a first or second mortgage or not. He said they held a first mortgage. Then he added “one of them”. To which Cr Calvert replied that it was either a first or a second and the first got paid first. And Grant McKenzie said something about people being ahead of them. He doesn’t give straight answers. Does he not know? Is he hiding something? Or has he been told by someone else not to give straight answers? What I would like to know is who is ahead in the queue for recovering money. And whether the people/businesses who are ahead have any connections with Delta. Incestuous connections. In case a group of people altogether have been playing ‘tails I win, heads you lose” – with the Dunedin ratepayers as guarantors. Delta may be going to lose but I would like to know if someone is going to win. And if so, who they are.
    Cr Vandervis was right saying two day’s notice is simply not enough time to understand these financial reports. Mayor Cull censured Cr Vandervis for making misleading statements saying (echoing Cr Wilson’s point of order – NOT!) that the councillors had had earlier access to the information at workshops. But this misses the point entirely that ratepayers were not able to go to those workshops. So they, too, had to understand these reports within the two days notice of the agenda, if they were going to understand them at the meeting at all. Impossible! Especially since the reports themselves were obfuscatory. And Grant McKenzie’s hedging answers to councillors’ questions just increased the murk.

    • Elizabeth

      Mayor Cull asserting Cr Vandervis was making misleading statements is defamatory. Cull needs to be very careful. Delta is not over as an object for attention just because Chris Morris got a useful statement from Grady Cameron at the same time Crombie and McKenzie were allowed by the chairman Mayor to stay silent in the face of most questions put to them by Cr Vandervis. We are now subject to further spin and concoction, with most public acting like sheep or not sufficiently close to DCC business to see what goes on when Mayor Cull is at the helm with mates in stripey Tshirts bearing cutlasses alongside, using the drowsy distraction of a little girl with her hair out on Monday, filling the air with nonsense and purring. LMAO

      • I’m not sure of whom you write, it’s v Dorothy Parker. They call her ‘Stormy’ Monday, but Tuesday’s just the same. Speaking of Sheep, I’ve had it with ‘Post A Note’ by Allied Press, who’ve taken the image of Che! and given him a Perendale visage.

    • Hype O'Thermia

      Sounds like Grant MacKenzie isn’t too sure what first and second mortgage means. In his job he ought to know. Hell’s teeth, he ought to know well enough to clearly explain them to people who can’t tell a mortgage from a moorhen.
      This isn’t reassuring is it? Did Cr Calvert look reassured?

      • Och, ye write Jacobite. Bonnie ‘Moor hen’, is code for the True Stuart Queen. So, they canna tell a mortgage (dead glove), from Mary, Queen of Scots, ken. Ken? That you, Ken?

      • Diane Yeldon

        Hype O’ Thermia: Rather than looking reassured, I would say Cr Calvert looked quite pissed off. But not anything as much as Cr Vandervis, who at one point said if he didn’t get answers to his questions, there wasn’t much point in his being there. To which Mayor Cull replied something smart in an undertone which I couldn’t quite catch. But possibly something to the effect that he’d be pleased if Cr Vandervis wasn’t there. All of this is like a silent movie with no soundtrack. Silent IMO when there should have been booing and hissing but above all: LAUGHTER. Like when Cr Vandervis commented on financial ‘movements’ and ‘changes’ without any information as to whether these were up or down and could they please have this information included in future. This is downright laughable. Even weirder was Grant McKenzie’s immediate response to the question about “change”. “Up or down,” prompts Cr Vandervis. McKenzie (at once): “There has been no change.” (!!!!) Then he amended this to “Er, up”. So Cr Vandervis says,(as if through gritted teeth and no wonder why) “So that’s an up.” Just recalling this is making me laugh. But no one there except me was laughing or smiling (except perhaps Elizabeth and I exchanging the odd smirk now and again). I really wonder if the majority of the other councillors understand what’s going on that they so rarely laugh. Or maybe they have no sense of the ridiculous. Because that the kind of ‘funny’ these council meetings so often are. Downright RIDICULOUS!

        • Hype O'Thermia

          To find it funny you have to comprehend what’s going on. You also have to be standing outside that particular tent. It takes confidence and courage to “do a Vandervis/Calvert” and even ask the tactless questions, risking the Scorn of Dave, and not being appointed to committees and being damned with the words “not a team player”. There are similarities with everyone except that one little kid in the story of the emperor’s new clothes. The rule is, don’t laugh till the boss laughs. Until that time there is nothing funny, okay?

        • Elizabeth

          See comment at another thread – about that tent…

  11. Peter

    Giving public officials permission to remain silent when asked questions is surely tantamount to a cover up.
    This Delta business has legs for the media. Outside media is watching.

    • Hype O'Thermia

      Confused again, poor Dave, thinking of David Bain as a precedent. He never said nowt, nohow. So – reasons our Enchained Malady – if it was good enough for him……….

  12. Gurglars

    Order of returns

    Banks – Most of whats left of the debacle
    Receivers – $25,000 per week
    Delta – SFA, zip, NADA, zero

    The latest news is that weeds are growing through the asphalt, any prospective purchaser will be paying 10c in the dollar of even perceived value.

    The nett results as Cr Calvert predicted –

    Another huge loss for the investment geniuses at Delta – a greater sum than the $24 million forecasted.

    Now on one score Jinty McTears just may be right. Do not invest in oil which includes asphalt. A belated I told you so, even if it’s a coincidence.

  13. photonz

    Cull is on another planet if he thinks Delta has done nothing wrong.

    Proof of incompetence is doing $13 million of work with no payments along the way.

    More proof of utter incompetence is buying into debt in a company that wasn’t paying its bills.

    Yet again Cull is working against the people instead of for them – like he’s paid to do.

  14. Hype O'Thermia

    “Yet again Cull is working against the people instead of for them – like he’s paid to do.”
    Why?
    Doesn’t he understand, is he functioning with the handicap of stratospheric levels of naivety?
    Progress payments aren’t something new. It’s not like the divide between digital natives and those of us who still suspect it’s Magic Smoke that makes IT work.
    Sometimes when an employee works against the interests of his/her employer it’s because someone else is paying more, but I don’t believe that of our Mayor. Who, that’s got enough money for substantial bribery, would be daft enough to think he could be relied on to deliver the goods?

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