Article

Du Val Group, a major player in New Zealand’s property development industry, has gone under statutory management after racking up over $256 million in debt. The Financial Markets Authority stepped in, appointing PwC as receivers on August 2, 2024, to take control of the company’s 64 entities. By August 21, statutory management was put in place to freeze assets and figure out the next steps to manage the chaos.

The numbers paint a clear picture of how bad things are. The group owes $181.5 million to secured creditors, $41.2 million to investors, and $26.6 million to unsecured creditors. On top of that, $7.5 million is owed to employees and Inland Revenue for wages and taxes. Yet, the group had only $6.6 million in cash when the receivers took over, leaving a massive gap between what they owed and what they had.

The group’s projects were a mix of completed developments, near-finished properties, and sites that were just getting started. Parry Terraces in Mount Wellington, for example, is a 38-townhouse project that’s finished but still heavily in debt. Te Awa Terraces in Mangere East is almost done, while Mountain Vista Estate in Mangere has stages still under construction, with apartments scheduled for completion in 2025. Sunnyvale Terraces, a 46-townhouse project, was only in the civil works stage, and Hillside Crossing in Mount Wellington had construction stopped early in 2024, leaving two apartment buildings half-finished.

The group’s heavy reliance on debt to fund these projects, combined with poor financial management, led to its downfall. The receivers noted major problems, like incomplete financial records and inconsistent reporting. While some properties were generating rental income, it wasn’t enough to cover debts or keep things running.

Investors are among the hardest hit. Many had put their money into the group’s Build to Rent fund, which was supposed to generate returns from large-scale rental properties. Instead, these properties were weighed down with mortgages, and the rental income wasn’t enough to keep things afloat. While secured creditors might get some of their money back, unsecured creditors and investors are unlikely to recover much, if anything.

When the receivers stepped in, they froze bank accounts and secured the $6.6 million in available cash. They also worked with creditors to keep some near-finished projects moving and started digging into the group’s financial situation. However, the problems were so big that statutory management became the only way forward.

Now, statutory managers are handling the mess. Their job is to sell off assets, deal with lawsuits over unpaid bills, and figure out how to distribute what’s left to creditors and investors. It’s a long and uncertain process, with no guarantee of full repayment for those who are owed money.

Du Val Group’s collapse is a clear example of how things can go wrong when a company takes on more debt than it can handle. For the investors, creditors, and others affected, it’s a tough lesson in the risks of large-scale property development.

This information comes from the PwC Receivers' Report and filings from the Financial Markets Authority.