Big payoff eluding troubled tribe

Casino Snoqualmie was supposed to launch the tribe's approximately 600 members to long-awaited economic prosperity, but instead it is bringing in only about a quarter of the revenue projected. And the tribe is hobbled in tackling its problems because of internal political turmoil.

By Lynda V. Mapes

Seattle Times staff reporter

The Snoqualmie tribe last November opened a showpiece casino a half-hour from downtown Seattle — and took on $375 million in debt — amid high hopes.

Published: Sunday, January 24, 2010, 2:28 PM Updated: Sunday, January 24, 2010, 5:00 PM

the rate of return (and/or the quality of the investment) on this thing won't attract Trumps or any of those guys - those guys play for big margins - quality returns.

these Casino guys are upto their eyeballs in debt Stateside - tied by the short and curlies to their financiers.

these are financially stressed guys Stateside - struggling just to make the mortgage repayments.

they are probably testing the waters in Fiji hoping that somehow they can generate enough returns over here to stabalise their overall operations Stateside - so they are most likely going to use finance from the FDB (or one of the local commercial banks - if they are able to convince any of the local commercial banks - which i doubt), and negotiate very cut throat terms over a lease at Denarau.

but the fact is that the hotels out on Denarau are trading in receivership - thats how deep the disequilibrium is over there. nobody mentions the fact that all those guys are trading under conditions imposed by creditors or actually trading in receivership - but thats the fact. Hilton, the Denarau villas etc etc etc they're all in that situation - Hilton Villas has been in that situation since 2009.

Denarau is not a money maker for those current operations - the margins are negligible

even with the greater volume of tourist arrivals which is constantly touted, its not made a dent in the negligible rate of return - and thats because the value has been dropped out of the market - its a discount market.

these Casino guys are going to set up an operation on Denarau and a small one in Suva - they are hoping to attract guys to their casino. that remains to be seen though - its not as if Denarau is minting gold right now. the hotels over there are struggling just to stay afloat as it is.

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Receivers of Fiji Beach Resort and Spa on Denarau Island say there has been no money to pay investors their promised returns. Photo / Supplied

The poolside villas, the beachfront location, the warm tropical air - it should be paradise.

But for 240 investors in the Hilton on Fiji's Denarau Island, the past 18 months have been more like purgatory. Some forced to mortgagee sale would probably describe it as hell.

Now the trouble in paradise has escalated to the point where owners are about to put padlocks on their villas, potentially disrupting the holiday plans of hundreds at the peak of Fiji's tourism season.

In the mid-2000s, the mostly Kiwi and Australian investors bought villas in Auckland developer Neville Mahon's Fiji Beach Resort and Spa, managed by the Hilton.

The 160-room resort was being developed in stages. Stages two and three with another 90 rooms have never been completed.

The investment attracted some high-profile names: television rugby commentator and former All Black Ian Jones; former All Black and celebrity agent Andy Haden and former Fisher and Paykel chief executive John Bongard.

The deal was that owners would get 10 weeks a year in their villas and the rest of the time earn a handsome return off the rental income gathered from hiring out the rooms.

Apart from one monthly payment from the receivers now in charge of Mahon's companies, villa owners have not seen a cent since September 2008.

When Coffs Harbour property developer Rob Vereyken bought his two-bedroom beachfront villa for $820,000 in 2006 he was promised a return of F$27,000 every three months.

His average quarterly return to date has been F$2500. Meanwhile he is paying $50,000 in interest annually to service the mortgage on the property.

Vereyken says it is impossible to know how much they should have been getting. "We've never seen a statement from Hilton to see what our true occupancy is and returns."

Invercargill investor Trevor Rogan estimates the current total owed to owners is $5.5 million and counting.

Rogan is at the forefront of a group of around 50 investors whose patience has well and truly run out.

They have given the receivers and Hilton notice that they will lock up their villas from August 1 unless a new management contract can be negotiated to give the owners control.

The lock-up is a last resort, Rogan says, but matters have come to a head. "The point is past. We've had enough."

Some have already lost their units to mortgagee sales. "I've had people on the phone in tears over it."

The legal action is now flying. On Friday a court in Lautoka was due to review a temporary injunction gained by the Auckland-based receivers KordaMentha to stop the lock-up going ahead.

This week the Fiji courts will hear the villa owners' bid to have liquidators appointed to Mahon's development company, Denarau International, and will consider amending an injunction from last year blocking all payments to owners.

Owners have been buoyed by a decision in Auckland's High Court two weeks ago in favour of investors in the city's waterfront Westin Hotel.

Justice Paul Heath cancelled the leases of 89 mostly Asian investors owed at least $3.8 million in rental arrears, giving them control of their rooms in the five-star hotel.

The Westin decision has put "the fear of God" into the receivers, Melbourne accountant and villa owner Graeme Knott says.

Receiver Grant Graham denies feeling any such pressure. "We have to get it sorted out, but not because of that."

Graham says a payment of $1.8 million is due to go to owners within the next couple of weeks and he does not believe the lock-up will go ahead.

Because of the impending payout, the injunction gained a year ago by investors blocking any payouts has to be amended.

They got this injunction to protect themselves, Auckland investor Sarah Hunter says.

By this stage they had gone nine months without seeing any money and there were real concerns about where income from the rooms was going.

"The further you investigated and delved into the issues the more questions ... came out of it."

Then Denarau International and its associated construction company, Denarau Investments, were placed in receivership in September last year, with Bank of Scotland owed $45 million and now-failed finance company Strategic Finance owed another $75 million.

The huge sums outstanding are one thing but a key problem for owners has always been the dysfunctional management agreement, Hunter says.

The agreement Mahon reached with villa owners is quite different from the management contract with Hilton, she says.

Owners were promised a 50/50 revenue split but the Hilton arrangement was based on a profit share.

"You've essentially got this three-legged stool and it's tied together with a management [agreement] that Neville structured, which conflicts completely with the agreement he put in place with the Hilton."

Owners want a complete restructuring of the arrangements.

They are committed to making the resort work and may even be prepared to invest in the yet-to-be built common areas in stage two.

Some stage two owners have refused to settle because without facilities Hilton won't rent out the rooms.

"The pool isn't even a hole in the ground yet."

One quarterly payment will not smooth things over, Hunter says. "Until the other issues are resolved it's nothing short of a plaster, really."

Graham concedes the management contract is probably "the worst" among the resorts of Denarau.

Asked why it has taken so long for owners to receive any money, he says there was "simply no money in the pot" when receivers stepped in to Denarau International and Denarau Investments.

The receivers spent months negotiating with a third party, which was looking at taking over all of the resort's secured debt including the amounts owed to villa owners.

That deal has recently fallen through, further holding things up.

But he remains hopeful of finding a solution. "I think we're working constructively with the villa owners' group in what is a tough environment."

Hilton did not return the Herald on Sunday's calls.

Resort running well while investors debate - Haden

The irony of the Hilton Fiji saga is that the resort is actually operating well, investor Andy Haden says.

Speaking from his Hilton villa last week, the former All Black turned celebrity agent said the resort was running at 89 per cent occupancy.

"The maintenance and upkeep and everything looks good."

Haden is critical of the Australian-led villa owner group embroiled in legal action with the receivers.

He is as annoyed as anyone at being out of pocket but he believes last year's injunction to freeze all payments has prolonged the suffering of villa owners.

He says the group speaks for a minority.

"I'm speaking for myself but what I'm saying is echoed by [others].

"If they've got 30, there's probably four times that many thinking along the lines I'm thinking." He describes the threat to lock up the villas as "incredibly dumb".

Investors got tax advantages from the Fijian Government to invest in a resort.

To now turn them into privately-owned villas would be "hoodwinking" the Fijian tax department. The only point he and other investors appear to agree on is the performance of the receivers, who Haden accuses of earning $1 million in fees.

"Did we need all these people with their grandiose ideas to run this thing, to find out that [developer Neville] Mahon hadn't run off with all the money?"

Melbourne accountant Graeme Knott is also critical of KordaMentha and it is one of the reasons the owners' group wants a liquidator appointed, he says.

Quarterly updates on the situation had never materialised, he said, one of a number of obligations that he claimed had not been fulfilled and had added to frustration.

Even developer Mahon claims the current situation is all about fees for receivers. "I think it's an absolute and total value-destroying disgraceful scenario."

But Invercargill investor Trevor Rogan notes there was already $2.1 million outstanding to owners before the receivers went in.

"Mahon got into the position of being in receivership."

By Maria Slade | Email Maria

we can then list out all the projects.

starting with Nakasi city

the look North tax free scheme

Waila City

Peter Wise's 10% deposit for 90% loan on a house

the multimillion dollar shipbuilding industry

the multimillion dollar yacht industry

the multimillion dollar dalo export industry

the multimillion dollar ICT call centres setup (Govt had even built a massive complex and given it away free of rent for the first two years on a 15 year lease plus Tax Free for thirteen years on one of those one's)

the multimillion dollar sugar restructure

the multi million dollar Air Pacific restructure

we can list how we have set a world record where tax revenue went up 25% but GDP fell down to next to zero and inflation hit double digits.

we can list how we "turned around" state owned enterprises losses and negligible returns by simply raising fees and levies on services 100% acros the board.

we can list down how we have made Denarau into an operation where the hotels set up there are either operating under receiversor on strict creditors conditions

and we can list the record of how we have surpassed any record ever set by any Govt in the post colonial history of this country for consectuve years of negligible growth - thats a Fiji record unprecedented in our post colonial history.

we can record how we have achieved our fourth coup d'etat in our post colonial history - and how we are the only country in the Soth pacific region to have this unparellaled record of coup d'etats

we can add to that how we are the only country in the common law world where the removal of a Parliament and a Government by the Force of arms has been judged legal in a lower Court - and where the abrogation of a Constitution has been done because a superior Court ruled that the lower Court's decision was erroneous.

we can record all the Decrees which have stopped Court cases. an unprecedented law making precedent in the Common law world.

we can write down how we told lies about our economic growth and how its was published on ABC network which led us to hiring consultants so that we can lie better. how we are spending millions on consultants who are teaching us to lie better.

we can record the extra judicial killing of civilians in this period of our post colonial history - how we have set a first for Fiji.

add to that the arbitrary detentions and torture that has now gotten us on the list of Amnesty International and the United Nations Human Rights Commission

and now we can add to the list how we have brought in a casino operator struggling to meet its mortgage payments in the United States, to set up casino's in Fiji

and we can record how so low our export sector has gone that we have set a new record in Fiji's post colonial history - we have never gone this low in our exports ever in our history post Independance. 

how we have reached a level of debt unprecedented in our post colonial history.

and we can record how the ADB has given us the mantle of being a South Pacific nation trapped in low growth - whilst all around us our neighbors are outstripping us with their economic growth and we are now listed withthe aid dependant countries, some of whom are even touted by the ADB to surpass us sconomically in the coming year.

we have set so many firsts in this period - so many "achievements".

Hong Kong, Dubai, Kuala Lumpar, Jarkata, Beijing - we've been everywhere between 2006 and this year - every other month our bosso's are flying off to somewhere.

and yet Solomons and Vanuatu have surpassed us in their economic performance.

Samoa which had a massive tsunami three years ago which decimated 65% of their economy - their whole tourism sector was wiped out. 100% devastation on their tourism sector - their economy was basically destroyed. the destruction they had is worse then what we had during the coup d'etat of 2006.

yet today Samoa has surpassed us in their GDP growth figures. not only have they recovered from the devastating tsunami they have rebuilt their economy AND THEY HAVE SURPASSED US.

PNG is well and truly ahead of all of us - ASEAN wants PNG to join up with them.  

the Cook Islands will surpass us next year.

we are in the aid dependant cohort of the Pacific economies - between 9th and 14th on the list.

all the other performing and strong economies are well ahead of us.

none of those guys had Waila city people or Nakasi city people or Qorvis or Red Indians turning up at their place to do this and that scheme

they just focussed on basic fundamentals and good governance and the rule of law

Solomons has been a star economy in this region over the last two years - its growth is outstanding.

all these countries around us are Democracies - and they are all doing far better than us.

we have received the greatest amount of loans from China for all sorts of things - none of these economies got similar loans - and yet their economies are performing way above ours.

their Prime Minister's aren't flying here and there - and they certainly aren't flying to Dubai. 

and they don't have to tell lies about their economy to attract investments - because its all there in black and white, they don't have to spend millions to hire professional liars to create propoganda for them.

all those guys are working hard on strengthening their law and justice sectors - and Canberra is playing a huge role in that - and the results are showing in their economies. full transparent legal systems where the rule of law is applied transparently and fairly and efficiently - and sound policy frameworks and fiscal frameworks.

so whilst those guys are focussing on their fundamentals our guys are going off to here and there in Dubai and everywhere else

these economies are all surpassing us - Solomons was in bad shape back in 2006 - way way in bad shape. today it is the star economy in the region they are making 8.5% of GDP growth. thats phenomenal.

what we are facing now is the net result of the selective non transparent and inefficient legal system and the economic and fiscal policy disequilibrium we have created over here - at the barrel of the gun. our economic outcomes are only reflective of that. bad governance, unsound legal systems, poor fiscal and policy fundamentals.

all these other democratic countries which are practicing good governance and rule of law funademantals are outstripping us.

tsk tsk tsk tsk

maybe they're hoping for Aussie and Kiwi punters.

or Chinese punters.

we'll see.

one things certain though - every Christian church in this country as of last night will have been praying for that casino's destruction. for utter confusion and chaos to overcome that thing and for its ultimate tearing down.

the way i see it, this thing will descend into confusion and chaos soon enough (with or without God).  

just like with the Tower of Babel these guys have started off with one objective of getting a casino going - but they will be speaking in many different tongues in short order.

the propoganda looks slick though - watched it on TV tonight. very slick. any guy on the street watching that news piece, without any fundamental business/commercial law practical knowledge of these things, on TV tonight would have been bought over - it was a slick TV news clip.

it surpasses the Waila City TV clip propoganda piece by a mile. that one was also on Fiji TV news. it was slick also.

tsk tsk tsk....