For Du Val, 'protecting investors' also means keeping them quiet

Du Val Capital Partners says it has the interests of its investors at heart and is prioritising funds for the completion of projects while protecting its investor funds. 

The Auckland property developer and non-deposit taker is also acting to plug media 'leaks' by disgruntled depositors on the basis that they are breaching confidentiality agreements as a "limited partner" in the funds. 

One elderly investor who said he relied on the interest payments through his now locked $800,000 investment in the mortgage fund, was this week 'reminded' of his obligations by Du Val's senior legal counsel, Matthew Hawkes, to "keep all information relating to the business" confidential under the terms of the limited partnership. 

Hawkes informed the investor that the company required him to remedy the 'breach' immediately, by amongst other things, destroying confidential information leaked to BusinessDesk. 

That's after another reprimand from the Financial Markets Authority (FMA) on Friday, for misleading investors in its mortgage fund – and the regulators' view that it has breached section 19 of the Financial Markets Conduct Act 2013.  

The warning followed complaints by investors that Du Val Capital Partners (DVCP) had locked their investments in the fund and suspended its last quarterly cash distribution, which will ostensibly remain locked until it finalises plans for an initial public offering (IPO) on either the New Zealand or an alternate stock exchange. 

That investment 'conversion' was being offered at a 25% premium on the $1 unit buy-in price. But investors started asking questions late last year.  

And particularly after DVCP chair Owen Culliney wrote to its investors last month, admitting that a listing wasn't certain, given there'd been no formal engagement with either the stock exchange or the FMA to date. 

Unable to meet obligations 

The FMA, meanwhile, privy to commercial information on financial services companies under section 59 of the FMA Act, said what the firm hadn't disclosed was that paying a cash distribution would leave the fund "unable to meet its other obligations". 

The FMA couldn't be more specific with BusinessDesk other than to say you could "draw your own conclusions" from that. 

On Thursday, Du Val's general manager of investor relations, Glen Williams, wrote to investors, noting it had objected to the FMA's position and that it took its compliance obligations seriously. 

Williams also noted that the 'offer in kind', made to fund investors on Jan 17, had been rejected by a handful of investors.  

So while the ability of Du Val Capital Partners to make an offer in kind has been called into question by the FMA, he said, "whether the FMA is correct or not is moot because that offer has not been able to be taken up and is, therefore, nothing more than an attempt to provide value to investors". 

As such, he said, the DVCP directors will resolve to suspend the Q4 2022 distribution "under clause 12.9" of the limited partnership agreement. 

Williams also said the company has now pushed out the likely timeframe for issuing an information memorandum (in relation to the IPO) due to delays on-site following the weather events in Auckland. The management team had also spent "considerable time" responding to both media and the FMA, he said. 

'Liquidity events' 

Williams said Du Val continues to prioritise funds for the completion of projects and the protection of investor funds. "Redemptions will be considered as part of the upcoming liquidity events on the terms of the LPA." 

Neither Williams nor Culliney would define which 'liquidity events' were referred to, though they are presumed to mean the sale of a property. 

The fund itself is underwritten by a portfolio of nine apartment developments in South Auckland, which Du Val Group founder Kenyon Clarke has valued at $750 million. The biggest completed development is the 151-unit Lakewood Plaza, which was finished in October 2020 but had significant delays and cost overruns. 

It is currently offering off-the-plan townhouses at its Mountain Vista Estate at Māngere, Edmonton Mews in Henderson, Verge Apartments and Parry Terraces in Mount Wellington. 

Williams said signed sales for February, in the meantime, had "exceeded expectations" at $14.36m, while unconditional sales for March were "ahead of projections" at $7.5m for the first nine days of the month on the back of increased interest from first home buyers. 

He said the developer had also exceeded the pre-sale threshold for its $66m Te Awa project in Māngere and would start work shortly. According to the relaunched Du Val Group website, its funds are now closed. 

One reference to Du Val Property Partners has been changed to Du Val Capital Partners (DVCP).