Time has ran out for Dan McEwan -

[donna]

Article in Sunday Star Times today....follows lots of discussion on Dan and his Investors Forum on PropertyTalk.com over the years.

Court Sequel to Property Tactics.

Slick sales pitches that raised $500m from investors will come under scrutiny this month. Garry Sheeran reports.
Controversial property developer Dan McEwan faces a court battle this month in a landmark prosecution expected to clarify rules protecting mum and dad investors.

McEwan has emerged as a major property developer in recent years, channeling more than $500 million worth of investment funds into some of New Zealand's hottest residential spots.

Much of that money has been raised through slick investment seminars run by McEwan's property investors network, the Investors Forum, and attended by up to 30,000 prospective investors.

But some disillusioned investors, as well as property professionals, have expressed concerns to the Sunday Star-Times about the modus operandi of the forum and the McEwan Group.

The court action, being brought this month after a complaint to the Securities Commission and investigations by the national enforcement unit of the Ministry of Economic Development, centres on safeguards designed to protect ordinary retail investors.

The Securities Act makes it an offence to offer a stake in an investment or company to such investors unless a detailed prospectus is issued and other safeguards are in place.

Exemptions are made for professional (or habitual) investors, and people with a lot of money, who are expected to understand exactly what they are buying into.

The charges against McEwan relate to money accepted from an investor by one of his companies, Stakeholder Finance Ltd, for a property development in the Queensland resort town of Agnes Waters.

Subsequently unhappy with his investment, Peter Gale sought legal remedies on his own behalf, but was dissuaded by the time and huge cost involved.

He then made a complaint to the commission which referred the matter to the national enforcement unit.

As a result, charges under sections 33 and 37 of the act, relating to the offering and allotting of shares without issuing a registered prospectus, were laid against McEwan and two companies of which he is the sole director, Stakeholder Finance and Agnes Waters Acquisition Ltd.

A hearing is scheduled for February 20 in the Auckland District Court , when McEwan will be asked to enter a plea.

McEwan told the Star-Times the definition of habitual investors had long been a grey area. "This case will clear things up," he said.

His company had corresponded with the commission on the issue many times, "and we are 100% positive on where we stand".

The act defines habitual investors as people whose principal business is investing money, or who habitually invest money in the course of their business.

Gale, a real estate agent, is not a professional investor and his request to buy shares in Agnes Waters was initially turned down by the promoters for that reason.

But Gale persisted and was subsequently allowed to do so.
Legal sources say the question remains over objective standards. "Does begging make any difference to an issuer's obligation to say no?" asked one. "It will be an interesting day in court."

McEwan is not alone in regarding the upcoming court action as a test case helping to define who is, and who is not, a professional investor.
But legal sources say a district court decision, one way or the other, may not carry the weight of a High Court decision.

"Possibly a good outcome might be to see any decision from this case appealed to a higher court," said one source.

The consequences for the Agnes Water offer are severe if one investor is found to be non-habitual.

The act says the entire offer must be unwound and all funds returned to investors, with a 10% annual interest payment.
Both the company and directors are deemed to be liable.

Meanwhile, newspaper advertisements by McEwan last month offering people with more than $500,000 to invest the opportunity to mortgage, joint venture or develop some of the group's major projects had disgruntled investors speculating that McEwan was finding it difficult to raise further funds from retail investors through his once-popular investment seminars.

McEwan said he was no longer actively seeking money through the forums.
"That is because we have created good, long-term relationships with a lot of people," he said.

"Despite difficulties in credit markets and complaints from some people, we find ourselves very well established."
Those complaints have centred on huge cost-overruns requiring investors to stump up with more cash, long delays on projects, and developments which relied on valuation increases for capital gains.

Since early 2001 the McEwan Group has completed 14 major property projects throughout New Zealand valued at $353m, according to the group's website.

It has further projects now being developed, or on the drawing boards, worth a further $447m.

Those include the luxury spa resort at Waiwera, north of Auckland, valued at $150m, for which McEwan sought investments for luxury apartments in late 2004, and work was due to begin early 2005.

But resort consents have only just been obtained, and work is now due to begin this year.

The projects also include the ill-fated Shearon Hotel in the Cook Islands.

Source: Sunday Star Times

I recall going to an Investors Forum 'free' seminar and Dan was very polished in his presentation and no doubt netted a few 'naiive' Ma and Pa types into his Queenstown development.

It will be interesting to see just how this case develops as it should be seen as a precedent for other 'like' free seminar - property floggers operating in NZ.

I get calls from LJ Hooker quite a lot and wonder just how 'real' their deals are....and there are oodles of these operators in NZ. Kapiti being full of baby boomers is just the market these people prey on. Other small towns with lots of baby boomers get hit on too....I can not wait till there are rules around what they can do, what they need to disclose etc.

Cheers,

Donna

[Bodmin]

We were nearly sucked in

A few years ago we went on one of these free seminars. It was followed by an intensive push to go to some sort of gathering in Auckland which included a look around some of the "opportunities". In many ways it was attractive with promises of rents etc..

We chose to do it ourselves and while it has been hard work at times we can at least say the decisions we made were all ours.

cheers

[catwoman]

It's not all bad...

I too went to one of his seminars in Wellington 2003 - The presentation was too slick for me and my gut instinct was to avoid them - however it wasn't all bad as I met my partner there and we have been investing (and nesting) together over the last few years.

I guess I have to thank investors forum for that!

Sure beats waiting more than 2 years for building to begin on your luxury apartment!

[Glenn]

I have definately noticed some wanabee nesters coming along to PIA meetings over the years.
I fail to see the glamour of cleaning flats after someone elses kids have done a runner.
I am sure it would be a smarter move to do the matching at the local martial arts class. Then at least you would both have the skills required for the dispatching.

[donna]

Ha nice one Catwoman .....and welcome to the forums!

I know a couple of people that have been stung by Investors Forum.... and unfortunately it is the only 'flavour of property investment' they know so hopefully that won't put them off for life.

Cheers,

Donna

[NZGEMS]

Yes I think i went to one of his free meetings in Hamilton many years ago around the time I seriously started in property or just before it might have been, so somewhere between 6-8 years ago now, went to the $100 Auckland one too but he was just trying to get us to buy into some appartments he was proposing to build, they never turned up for the meeting they were ment to have with us back in Hamilton where you paid your $5k or what ever it was deposit to get involved. had decided not to go ahead anyway.
Seemed kind of fishy to me at the time, but I guess some must have bought in. (lots by the sound of it)

Robyn

[Glen]

I am sure it would be a smarter move to do the matching at the local martial arts class. Then at least you would both have the skills required for the dispatching.

I love it!

[captaincrab]

I've been aware of these guys for years. Its about time the Securities Commission had a go at them. The McEwans promote themselves as developers but they are really just salespeople. I dont think they have ever delivered ONE development on time, numerous projects have had cost over runs which buyers have had to pay for and meanwhile these guys have taken their sales commission and moved onto the next bunch of suckers. Our law should be tighter so we can clean out this "type" of spruiker.
David Parker

[catwoman]

I fail to see the glamour of cleaning flats after someone elses kids have done a runner.

Thanks Glenn - was having trouble picking a suitable username - but now I see it: Catwoman is history, from now on I will be known as Glamour-puss.

Will make note to wear my $2 shop tiara to keep the hair out of my eyes next time I go round to spray the weeds at the flats.....put the glamour back into property investing!

Thanks for the welcome Donna - sad to see not everyone had the pleasant experience I did at Investor Forum meeting

[muppet]

McEwan Group investors led a merry dance
Sunday Star Times | Sunday, 10 February 2008

After our story last week revealing landmark legal action over property investment deals involving McEwan Group, we received a flood of responses from readers. Garry Sheeran reports on the experience of one couple.

Trevor Dodd arrived at "retirement" age with a modest but hard-won nest egg only to see it apparently disappear into the ether.

He and his wife Alison invested the $150,000 of cash assets carefully garnered over a working life into a property scheme promoted and managed by the McEwan Group.

Their expectation was it would be returned within two years with a yield of either 90% or 147%.

And that would have almost coincided with Dodd's 65th birthday to supplement their NZ Super payments through retirement years.

But four years after making their investment, their money has not been returned, they have received no dividend payments and have no firm indication of when they will get their capital back.

Trevor worked professionally as a dancer. "I'm the artistic, emotional type anyway," he said.

But recent events had become a "nightmare" for him; "it has destroyed our dreams, plans and family inheritance."

"I am 66 years old and have saved all my life, living very frugally so as to have some financial reward when I retired," he said.

"Instead I find myself in limbo, waiting for more than three years to see our money, and now in danger of even losing the house we now live in."

Alison has gone back to work, but that's what she wanted to do anyway. She completed an extramural business degree through Massey University and has a small real estate business in Christchurch, where the couple and two of their children live.

She said that when they asked for their money to be returned, they were told there was no money available to repay them. "And that's all they will say."

The money they invested as dividend-producing property syndicate preference shares in a company controlled by the McEwan Group was to be used to build luxury apartments in the Pounamu development in Queenstown.

Alison said instead of having their money returned, they had been asked to consider purchasing one of the Pounamu apartments instead, which they could either onsell at a profit or mortgage and rent out as an investment.

She said the option would be workable if the price they were being offered for the apartment was at true market value. After making other inquiries in Queenstown, she did not believe that was the case.

Trevor said: "They offer us options that are really no option."

The Dodds' life savings had been invested in a single property which they sold in 2003. They bought a small home in Brighton where they live, and looked for a suitable investment for the near $150,000 they had freed up. "It was virtually all we had," said Alison.

In August that year she, and later Trevor, began attending Investor Forum property seminars in Christchurch fronted by developer Dan McEwan.

The name of the seminars and "workshops" has since been changed to the School of Astute Property Investment, or simply The Property School.

Besides committing all the money from the sale of their original property, they also re-mortgaged their new, smaller home to $20,000 to make up the $150,000 investment they decided to place with the McEwan Group.

That was the start of a turn of events that has slowly but inexorably become a nightmare.

Alison said they had been advised to seek recourse through their lawyers "but we don't have the money to pay the fees."

However, commercial lawyer Geoff Mirkin, a managing partner of Dunedin law firm Wilkinson Adams, has been advising several clients who have made investments through the McEwan Group, including the Dodds.

He is putting a case to the Companies Office that it audit the books of development companies where the money ends up and is hard to trace.

The Dodds' initial investment was with Forum Finance Ltd, a finance company which issued a prospectus to raise funds and which publishes annual financial accounts, in compliance with securities law.

That money was then passed on to a development company called Pounamu Prime 2, which does not have the same requirements to publish financial information.

But for the Dodds, the more immediate issue is the security of their own Christchurch home.

Besides buying shares in a McEwan company which built properties, they also put a deposit on an apartment in an Auckland development by the same group.

That development has been completed, and the Dodds were planning to use their capital and dividends from their other investment to help complete that purchase.

Instead, they have had to take out a $195,000 mortgage on that property, and hope the rent covers the bill.

"It's proving very difficult to pay that each month," said Alison. They are worried their own home could be at risk as a result.

She is hoping for some resolution for what has been a nightmare for her, too "it's very stressful and I'd love to have a good night's sleep," she said.

She finds it difficult to picture how things will eventually turn out.

"Dan McEwan has a way of keeping on promising things," she said. "He has these ideas and mentions other investments, and you think you might get your money back.

"But you also feel that he strings you along."

http://www.stuff.co.nz/sundaystartim...5045a6445.html

[Commercial Dan]

Yup, another one dear I say it.

This seems to be a regular occurance every week now, please please please, DO NOT get sucked in by any apartment or land developers at this stage, you will be history if you do.

In property invetsment, your objective for getting into it in the first place would probably have been to get ahead of the crowd. Ask yourself, if this so called 'deal' is available to the crowd then how does that elevate you above it?

[donna]

Yeah - and how easy it is for Dan to negate any responsibility! Of course the structures worked in their favour (maybe he and the team had 'been there - done it before').

Good reporting by Garry Sheeran.

Cheers,

Donna

[muppet]

Investors' money on the cliff edge
Sunday Star Times | Sunday, 17 February 2008

McEwan Group investors are aghast to find themselves told to pour more into their clifftop apartments or risk losing everything. Garry Sheeran reports.

The threat of a mortgagee sale hangs over a McEwan Group luxury apartment development in Doubtless Bay, Northland, if a loan is not repaid to financier Dominion Finance by the end of this month.

The company involved in the project, Crystal Waters Ltd, has told retail investors that if they do not stump up with more money, they would likely lose what they had already invested.

That has angered some investors who say they do not want to throw good money after bad.

Two such investors said the turn of events with the Doubtless Bay Villas project had parallels with their experience of investing elsewhere with the McEwan Group.

Other McEwan Group investors have also told the Sunday Star-Times of their frustrations over evaporating promises of high returns, of long delays in the return of their capital investment, and now their fears they may not see their money again.

Dan McEwan faces a court hearing on Wednesday after the Companies Office queried the legality of another of its investment schemes.

One of the Crystal Waters investors, Alan McDougall, invested $250,000 by buying preference shares in the development in late 2004.

He also signed up for a luxury villa which was built and for which he paid $805,000 in September last year.

But the apartment, which he has tried, but failed to sell, and which has not yet been rented out, is costing him around $1000 a week to finance.

And he is not expecting to see anything of, or from, the $250,000 he invested in 2004 for another three years at least.

MacDougall said McEwan originally talked about the investment returning 300% ("which I never believed"), then 200%, 150% and now 70%.

"But if you worked that out over seven years and take off tax, you would have been better putting your money in the bank," he said.

"The reality now is we will be doing OK even if we just get our money back."

Another Doubtless Bay investor, who wished to remain anonymous, said he believed Crystal Waters was using scare tactics with investors over its current problems.

"They are saying it is all our fault, but we feel we are being threatened, and we don't believe it is us who are not delivering," he said.

Frustrations reached a pitch following a letter dated January 22, in which Crystal Waters told its preference shareholders the development's financial problems had been exacerbated by those investors who had decided against buying a villa.

McEwan and another Auckland property developer, Chris Hook, are directors of Crystal Waters.

The letter, signed by Hook, said investors who hadn't bought units had caused about $3 million of the financial problem faced by the company. "You know who you are," said the letter. "We urge you to reconsider your position in view of the possible consequences for all shareholders."

MacDougall said some shareholders had declined to buy Doubtless Bay apartments when they realised their preference share investments in the development would not be available, as had been expected, for them to put a reasonable deposit on an apartment.

He understood as many as 10 of the 26 apartments in the first two stages of the development, valued at $21m, remained unsold.

The letter went on to say that there was "only a remote possibility" Crystal Waters would be able to repay a loan to Dominion Finance by the end of this month.

The company said it anticipated its failure to do so would result in a notice being issued by Dominion Finance "which is the first step mortgagees must take in a process that can lead to a forced sale of property".

That could mean Crystal Waters would have no option but to sell unsold apartments for whatever they could get, and sell all or part of valuable clifftop land on which they planned to develop a third stage of the project, valued at $28m.

"Should we be forced into this position it is very likely that investors will lose their present investment and the profit that would otherwise be earned from completion of the final stages," the letter said.

Dominion Finance chief executive Paul Cropp said his company maintained confidentiality on its relations with all its customers. "But the option of issuing a notice under certain circumstances is available to us on any loan we make," he said.

The prospectus issued in 2004 for the Crystal Waters project offered up to $1.9m for subscription, with shares worth $10,000, and a minimum subscription of seven shares.

It is understood some 20 investors put around $1.4m in the Doubtless Bay project.

MacDougall said the frustrating aspect of the financial difficulties was that the apartments built were of first-class quality, had been built on cost and their siting was magnificent.

But with news that 10 remained unsold and Dominion Finance wanted to be paid out, "you can guess where it's heading", he said.

"I hope they get it sorted, I really do," said MacDougall.

"But I'm not holding my breath."

Even if a rescue or refinancing package was put in place, it would be a minimum of three years before investors would be paid out after the stage three development.

"In the meantime, we service our mortgage on the apartment we chose to buy. So I'm afraid it's all ending in tears for us."

http://www.stuff.co.nz/sundaystartim...4297a6445.html

[mjmarketing]

Can anyone give an update on what has happened since? - the outcome of the courtcase and where their developments are at now?

[spurner]

Investors voice reservations at progress on Dunedin Hilton

The McEwan Group's proposed redevelopment of Dunedin's historic former chief post office as a Hilton hotel is shaping as another casualty of the credit crunch.

Rumours sweeping the southern city that the project was in trouble led Tourism Dunedin to seek a meeting with developers Dan and Kelly McEwan on Friday.

Chief executive Hamish Saxton said the city was keen to see the Hilton brand in town, "and rumours are not helpful to any project. We want to ask straight questions and get straight answers".

Investors in the McEwan project are taking legal action this week to find out what has happened to the money they have sunk into the project.

Dunedin lawyer Geoff Mirkin said some investors had been told the project had run out of money, and they wanted to know how their investments had been spent.

Mirkin is acting for four clients who had invested around $700,000 in the project, and Mirkin believed they had rights to information under agreements they signed with the company.

He said his clients were in effect joint venture partners with McEwan in the project "and it is unusual in such a partnership for one party to have access to all the information and the others, not".

Previous requests for information had been refused. But the request this week would be made under the precise terms of the general security agreements signed by investors.

Mirkin said he was not suggesting any money had been misused. "But my clients are completely blind because because they don't have the information they believe is their right."

Friday's meeting with Tourism Dunedin and city councillors did not eventuate, but Saxton said statements by Dan McEwan that he was now seeking a 50-50 joint-venture partner to develop the old CPO building needed clarification.

One factor worrying investors is whether interest payments are up to date on the property's mortgage to South Canterbury Finance. The loan is for up to $10 million, though it is not known how much has been drawn down.

Dan McEwan said details of financing were confidential, but in the current market it was becoming impossible for developers to fund projects. "And while people can't make decisions about lending, it doesn't stop things like interest and other payments ticking on."

Hilton Hotels Australasia vice- president Ashley Spencer said that while current conditions might not be favourable for development, "we remain committed to the project and supportive of Dunedin as a destination and location for a Hilton hotel".

McEwan said: "We are not admitting defeat, but we are in a market where it is impossible to obtain funding. Yet there may be other ways of proceeding, and we are keen to explore these."

THE BUILDING

The heritage-listed former Chief Post Office building in Princes St, Dunedin, was built in the 1920s, but has been closed since 1994. Previous plans to redevelop the site as a luxury hotel have not gone ahead.

McEwan Group bought the property and site in June 2006 for $7 million and McEwan has secured a 10-year management contract with Hilton Australasia. It was due to open in 2010 as Hilton's second New Zealand hotel and the first in the South Island.

McEwan Group has also been selling hotel apartments and suites to investors at prices between $280,000 and $380,000.