Owners disappointed at receivers' actions

Owners disappointed at receivers actions.

The owners of more than 110 rooms at Auckland’s troubled Westin hotel are disappointed that the receivers have failed to resolve ownership issues at the hotel.

Receivers Korda Mentha control both the management company who runs the hotel and of the company that owns the bar, restaurant and commercial units. They have been in discussions for the past few weeks with the owners who comprise over 65% of the hotel rooms in an endeavour to reach a solution to the hotel’s problems.

The owners invested around $80,000,000 with the promise of high returns and participation in New Zealand’s burgeoning tourism industry. Instead, most have had minimal returns and despite opposition from the receivers, the High Court ordered the termination of the individual leases on the hotel rooms from Wednesday 11 August. The owners tried to engage the receivers in dialogue that would see the hotel continue to operate at full capacity, and made an indicative offer to purchase the assets controlled by Korda Mentha, but as this was effectively rejected without proper response, these rooms will now close.

The closure of these rooms means that the Westin hotel company, which operates the hotel, will shortly have less than 60 units to operate and is expected to shortly lay off up to 100 staff.

The owner’s solicitors have been advised that the receivers will try to prevent the 110 owners from gaining access to their property, as well as disconnecting the power, telephone and television.

“There is a very real potential here to badly damage New Zealand’s tourism brand, throw into disarray the plans of hundreds of guests booked for the 2011 Rugby World Cup, cost jobs and be a black mark against New Zealand’s international reputation as a safe place to invest,” says the owners’ representative, Graham Wilkinson.

The owners had obtained an independent valuation of the assets controlled by the receiver and subsequently had made an offer to purchase these but no response was received to it.

“The situation is deteriorating and it is disappointing that a sensible outcome could not be negotiated. This property is New Zealand’s premium hotel, in our largest city and we are going to watch a slow destruction in value and a large inconvenience to thousands of guests” lamented Graham Wilkinson.

Background information

The Westin Lighter Quay Hotel complex was developed by Nigel McKenna’s Melview company under a unit title structure with 173 rooms and a variety of commercial spaces with individual unit tittles. Melview guaranteed unit owners a fixed return for three years.

Unit owners later discovered that under their leases they were required to pay an annual rental lease cost in excess of $2,500,000 for the commercial spaces within the complex to Melview but did not receive any income from the operation of those spaces.

Further, Melview defaulted on its obligation to pay the rental due for the rooms to the owners. Those owners were forced to put the Melview related company into liquidation and the Court cancelled the leases of units from 11 August 2010.

The main creditor, the Bank of Scotland (BOSI) appointed KordaMentha to the Melview companies that held the leases of the rooms, 16 of the units and all the commercial spaces.

The owners of 114 units are now in negotiations with the receivers to restructure the hotel to keep it open and purchase the commercial spaces at a fair price.

ENDS

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